The foreign exchange bureau has taken action! More and more U merchants may be charged with illegal business operations! — Qingdao police cracked a case involving 15.8 billion in underground banking.
The life of U merchants is becoming increasingly difficult.
Following the Guangdong High Court's release of typical cases on December 16, where U merchants were sentenced for illegal business operations (detailed interpretation by the security team can be found in 'Illegal Business Operations, has it become a frequently encountered criminal charge for crypto U merchants?'), CCTV News reported another heavyweight news — a major underground banking case was cracked in Qingdao, Shandong, where key perpetrators were virtual currency acquirers involved in illegal business crimes, and the case has now been transferred to the prosecution for review.
01｜One thread pulls the whole body
On December 24, 2023, according to multiple official media reports, the Qingdao Public Security Bureau and the local branch of the State Administration of Foreign Exchange jointly cracked a case of underground banking involving an amount as high as 15.8 billion. 74 suspects arrested are spread across 17 provinces and cities.
Although many virtual currency acquirers/U merchants were arrested in this case, the initial incident was not due to the U merchants.
'The daily flow of these 1,000 accounts exceeds 3 million, with a total transaction amount reaching over 2 billion. These funds exhibit characteristics of all-weather, high-frequency operations, and quick in-and-out transactions.
These account operation addresses are overseas, but the account holders have never been abroad.'
Through investigations, police found that 'Jin' was suspected of providing illegal money exchange services using bank accounts under his control, constituting illegal business crime.
But the key point is: police traced the funds and discovered a large amount of money flowing into multiple accounts controlled by 'Li', who is an employee at a textile factory in a county, yet has bank transactions totaling up to 5 billion!
Upon further investigation, it was discovered that she was actually a virtual currency acquirer, using overseas trading platforms to help Jin convert RMB into Tether, and then transfer it abroad for cashing out.
02｜Arbitrage through currency exchange, is it arbitrage or criminal involvement?
'We received RMB, bought Tether from Li, then used Tether to buy various virtual currencies, and then moved them to foreign exchanges to trade coins, making profits and then selling them for local currency.'
'The profit is between 0.3% to 0.5%, and many people are doing it.'
This is the process reviewed by the case-handling police, and it is almost identical to the current business of many U merchants.
03｜The security team analyzes as follows:
✅ Two cases in Guangdong and Shandong have strong similarities:
Both were linked to U merchants due to money exchange investigations or underground banks;
Both completed cross-border fund circulation through 'buying and selling virtual currency + transferring funds';
Both were identified as constituting 'illegal business operations', with some also considered 'disguised foreign exchange trading'.
The Dapu Court of Guangdong Province even explicitly stated: 'This price difference cannot be earned', reflecting the current negative characterization of buying and selling virtual currency by the judiciary.
04｜The security team boldly predicts:
1️⃣ U merchants will become key targets monitored by the foreign exchange bureau, collaborative actions between public security and foreign exchange management will become normalized.
The anonymity, speed, and borderless characteristics of virtual currency make it inherently easy to be used for cross-border transfers, money laundering, and fraud in surrounding industries.
Especially online gambling and fraud gangs have been long stationed in northern Myanmar, needing U merchants' cooperation to bypass regulation urgently.
RMB → Virtual currency → Foreign currency, once the entire process falls under the scrutiny of the foreign exchange bureau, it will be investigated!
2️⃣ The combination of 'illegal buying and selling of foreign exchange' + 'illegal business operations' may become the mainstream of future convictions.
Although there is still significant theoretical controversy:
Does buying and selling virtual currency constitute 'business activity'? Does it fall under the 'business' referred to in the illegal business operations provisions of (criminal law)?
Is virtual currency considered 'foreign exchange'? Is it subject to (Foreign Exchange Management Regulations)?
However, the security team believes: once you receive payments from public accounts, engage in frequent transactions, high-frequency arbitrage + have suspicious counterparties, the probability of conviction will quickly increase.
3️⃣ U merchants will frequently become involved in major cases related to 'underground banking' in the future.
The key point is: you may not be a criminal, but you could be a 'tool' on the path of crime.
You don't know where the client's money comes from, nor how the currency is used;
You're just earning a fraction of a 'price difference', but when judicial authorities trace the chain, they will follow the currency back to you.
Even if it's not ultimately 'illegal business operations', you may still be charged with concealment, aiding, telecom accomplice, gambling accomplice, and other offenses.
⚖️ Don't overlook the legal basis:
(2019 judicial interpretation by the two highest courts) Article 2:
Buying and selling foreign exchange and disrupting market order, if the circumstances are serious, constitutes illegal business operations.
(Public Security Ministry & Supreme Procuratorate case filing standards 2022):
Illegal foreign exchange trading behaviors with illegal operating amounts of 5 million or illegal gains over 100,000 will be filed for prosecution.
In other words: if you earn 100,000, you might be investigated!
✅ The security team reminds U merchant friends:
Buying and selling U currency itself is not illegal, but high-frequency orders and large amounts mean you shouldn't expect no risks;
Every transaction must be cautious; don't assume you're safe just because the client says 'it's for trading coins';
If the counterparty is suspected of money laundering/fraud/underground banking, even if you're unaware, you may still be 'processed together'.
🧱 In summary:
It's not that you broke the law, but that you're helping others 'quietly break the law'.
The foreign exchange bureau's actions are just the beginning; the regulatory 'mirror' has already been opened!
📌 Want to continue learning:
How to judge the compliance boundaries for U merchants?
How can OTC merchants protect themselves?
New developments in foreign exchange regulation?
Welcome to like + comment 'continue to improve', the security team will show you the red lines in the cryptocurrency circle!