Regarding the Exchange of RMB and KRW! China Cracks Down on Illegal Virtual Currency Transactions Involving 2.14 Billion Yuan

According to Chinese media reports, the Panshi City Public Security Bureau in Jilin Province successfully cracked an underground banking case that used virtual currency for illegal operations, involving approximately 2.14 billion yuan. Six suspects who committed crimes in both China and South Korea were arrested.

The police explained that the suspects utilized the characteristics of virtual currency such as anonymous transactions, decentralization, and borderlessness to illegally conduct RMB and KRW exchange business.

It is reported that the Economic Investigation Brigade of Panshi City Public Security Bureau discovered important clues during their work. Jilin resident Jin and accomplice Shen were found to be conducting KRW exchange business in South Korea and China. During this process, they defrauded others of money and then fled back to China.

Following these leads, the police found that the bank accounts under Jin and Shen’s names had large transaction flows, with frequent and varied daily fund movements and numerous clients, fitting the characteristics of an illegal underground banking operation.

The police's special task force conducted comprehensive analysis and judgment on the direction of funds and social relations surrounding Jin and Shen's bank accounts. They expanded the organizational structure and transaction levels, gradually obtaining a comprehensive understanding of the gang’s organizational structure and fund flows.

Subsequently, the police successfully arrested suspects Jin, Shen, and others, and lawfully seized a large number of bank cards and tools involved in the crime.

The police investigation revealed that the criminal gang used domestic accounts to receive and transfer funds, conducted OTC virtual currency transactions, and settled in KRW, engaging in illegal foreign exchange business. They helped groups such as Korean purchasing agents, cross-border e-commerce, and import and export trading companies exchange RMB and KRW.

Through extensive investigation and evidence collection, the police subsequently arrested other individuals involved, including Chen, Luo, He, and Zheng.

On January 2 of this year, China’s Supreme People’s Procuratorate issued an opinion on fully utilizing prosecutorial functions to legally support and ensure high-quality financial development, emphasizing strict punishment for illegal fundraising crimes involving virtual currencies like USDT. The State Administration of Foreign Exchange of China formulated the "Bank Foreign Exchange Business Management Measures (Trial)," effective from January 1, 2024, requiring banks to promptly submit foreign exchange risk transaction reports.

On December 27, 2023, the Supreme People’s Procuratorate released significant information, jointly publishing eight typical cases of punishing foreign exchange-related crimes with the State Administration of Foreign Exchange. These cases highlighted that converting virtual currencies like USDT to RMB is illegal foreign exchange trading.

Currently, more and more illegal foreign exchange trading crimes are being carried out through virtual currency transactions. The Supreme People’s Procuratorate emphasized the need to strengthen the connection between administrative and criminal enforcement to crack down on illegal cross-border financial activities according to law.

The head of the Fourth Procuratorate of the Supreme People’s Procuratorate stated that the released cases primarily targeted cross-border knock-type illegal foreign exchange trading cases.

In such cases, RMB and foreign currencies do not physically flow across borders but instead circulate unilaterally within domestic and foreign markets. This is essentially disguised foreign exchange trading, disrupting the order of the foreign exchange market. Serious cases constitute the crime of illegal business operations.