The Shenzhen Local Financial Supervision Authority in China has released a "Risk Warning on Speculation in Virtual Currency Trading," cautioning that virtual currencies lack a clear value basis and are highly susceptible to malicious speculation and price manipulation. They emphasize the need to strictly prevent some unscrupulous enterprises from using virtual currencies or "overseas digital options" as gimmicks to conduct illegal fundraising and other fraudulent activities.
In response to the recent rise in speculative activities related to virtual currency trading, the risk warning points out that some groups use virtual currencies and "overseas digital options" as bait to lure people into speculative trading, disrupting economic and financial order, and fostering illegal activities such as gambling, illegal fundraising, fraud, pyramid schemes, and money laundering, which severely jeopardize the property safety of the public.
To protect the legitimate rights and interests of the general public, the Shenzhen Local Financial Supervision Authority advises the public:
- Virtual currencies do not have the same legal status as legal tender.
- Activities related to virtual currencies are considered illegal financial activities, and those involved in such illegal financial activities will be held criminally liable.
- Overseas virtual currency exchanges providing services to residents within China via the internet are also considered illegal financial activities.
- Engaging in virtual currency investment and trading activities entails legal risks, and any civil legal actions violating public order and good customs are invalid, with the resultant losses to be borne by the individuals themselves. Activities suspected of disrupting financial order and endangering financial security will be investigated and punished by the relevant authorities in accordance with the law.
The risk warning emphasizes that virtual currencies lack a clear value basis and are highly prone to malicious speculation and price manipulation. It is crucial to guard against some unscrupulous enterprises using virtual currencies or "overseas digital options" as gimmicks to conduct illegal fundraising and other fraudulent activities.
"Please enhance your awareness of risk prevention and avoid becoming victims of illegal fundraising and other fraudulent activities," the warning states.
For those already involved in related trading activities, authorities recommend exiting as soon as possible, keeping relevant evidence, and actively reporting to local regulatory authorities and public security agencies.
Additionally, on December 27, 2023, the Supreme People's Procuratorate of China released significant information, stating that it has recently issued eight typical cases of punishing foreign exchange-related illegal crimes in conjunction with the State Administration of Foreign Exchange. These cases highlight that converting virtual currencies like USDT into RMB constitutes illegal foreign exchange trading. Currently, an increasing number of illegal foreign exchange transactions are being conducted through virtual currency exchanges. The Supreme Procuratorate emphasized strengthening the connection between administrative and criminal enforcement to crack down on illegal cross-border financial activities in accordance with the law.
The head of the Fourth Procuratorate of the Supreme People's Procuratorate stated that the published cases mainly target cross-border matching-type illegal foreign exchange transactions. This type of transaction is a typical manifestation of illegal foreign exchange trading, where RMB and foreign currencies generally do not physically cross borders, creating the illusion of unidirectional circulation of funds within and outside the country. In reality, it constitutes disguised foreign exchange trading, disrupting the foreign exchange market order. In severe cases, it constitutes the crime of illegal business operations.
The official emphasized, "In China, virtual currencies do not have the same legal status as legal tender, and related business activities are considered illegal financial activities. Currently, more and more illegal foreign exchange transactions are being conducted through virtual currency exchanges. In case handling, it has been found that using virtual currencies as a medium to indirectly achieve currency value conversion between foreign currencies and RMB is an important link in the chain of illegal foreign exchange transactions, and should be punished in accordance with the law."
Further Reading: Breaking News! The Supreme People's Procuratorate of China and the State Administration of Foreign Exchange: "Converting USDT to RMB Constitutes 'Illegal Foreign Exchange Trading'" Strengthen the Connection Between Administrative and Criminal Enforcement to Crack Down on Cross-Border Activities.
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