China Intensifies Clampdown on Cryptocurrency, Specifically Targets Tether

China's Legal Stance Hardens Against Crypto

In a significant development, Chinese authorities have escalated their crackdown on cryptocurrency usage, focusing particularly on Tether (USDT) in foreign exchange transactions. This move deepens the existing prohibitions set over two years ago, which encompassed a comprehensive ban on cryptocurrencies.

Joint Warning Issued by SPP and SAFE

On December 27th, a joint warning was issued by the Supreme People’s Procuratorate (SPP) and the State Administration of Foreign Exchange (SAFE). This statement cautions the public against the use of USDT as a means to trade the Chinese yuan against other fiat currencies. It explicitly labels the use of Tether for exchanging local and foreign currencies as illegal.

Enforcement of Stricter Measures

The authorities have called for local enforcement agencies to implement more stringent measures. These are directed against the use of the Tether stablecoin in cross-border foreign exchange transactions. Additionally, all cryptocurrency exchange activities involving the yuan, even indirect involvement such as providing technical support or exchange services, are deemed illegal.

Recent Legal Actions Highlight the Crackdown

The intensification of these efforts is highlighted by the recent case of Zhao Dong, founder of RenrenBit. Zhao was sentenced to seven years in prison and fined 2.3 million yuan ($322,000) for his involvement in Tether transactions. Another individual was sentenced to nine months for purchasing Tether worth 94,988 Chinese yuan ($13,067).

Cryptocurrency's Persistence Despite the Ban

Despite the sweeping 2021 ban on cryptocurrency activities, including trading and mining, cryptocurrencies like Tether have maintained a degree of popularity in China. In 2022, Beijing’s Chaoyang District People’s Court ruled against using stablecoins like USDT for salary payments. Nevertheless, as of October 2022, China continues to be a significant player in the global crypto market, even ranking as the second-largest Bitcoin mining hub.

Despite these rigorous enforcement measures, the resilience of the cryptocurrency market in China highlights a complex, ongoing challenge for the nation's regulatory authorities. The persistent use of digital currencies like Tether, even under stringent legal scrutiny, underscores the intricate dynamics between regulatory efforts and the evolving landscape of digital finance.