Guangdong case: Reselling USDT to make a profit was convicted of illegal foreign exchange trading and illegal operation

The Guangdong Higher People's Court's official account published a post stating that the defendants Chen and Huang traded approximately 814,000 Tether coins, which amounted to more than 5.1 million yuan in exchange based on the exchange rate between the yuan and the dollar on that day. On their way back from renting a car, they were caught red-handed by police officers, and the transaction proceeds were seized on the spot. The Dapu County People's Court determined at first instance that the defendants Chen and Li used the form of buying and selling virtual currencies to buy and sell foreign exchange in disguise, which was a serious circumstance and constituted the crime of illegal business operations.

The judge explained: The defendant in this case used cash to purchase Tether from retail investors in the "currency circle" at a price lower than the platform, and then resold it at the exchange rate of the US dollar on that day, earning the difference and making a profit. According to the confession of the principal offender in this case, in order to purchase Tether and resell it for profit, he even borrowed money from the bank, and the loan amount was as high as millions. This large amount of funds converted into US dollars through Tether will inevitably reduce the country's foreign exchange reserves, affect the country's macro-management of foreign exchange, undermine the only legal status of the RMB in the domestic market, and greatly interfere with the effectiveness of foreign exchange management and the stability of legal exchange rates, disrupting the normal order of the financial market. It is a disguised act of buying and selling foreign exchange and should be punished.

Lawyer Liu Yang pointed out in his analysis that there is insufficient legal basis for conviction and punishment for illegal business operation; the buying and selling of virtual digital currencies in this case does not fall under the listed illegal financial activities; and without a reply from the State Administration of Foreign Exchange, the court cannot make a judgment based on this.

Lawyer Liu Yang introduced more details of the case: In November 2021, Chen started a business of buying and selling virtual currencies with cash. He bought USDT from retail investors in the cryptocurrency circle and then resold it to the acquirer to earn the difference. The price of each transaction is set by the acquirer, who compares the price of USDT with the prices of other virtual currencies on the same day and calculates the profitable price.