China has declared the use of Tether (USDT) as an intermediary for exchanging with the Chinese yuan illegal. The Public Prosecutor's Office in China issued a warning on Wednesday (27), calling for "severe repression" against the use of Tether for currency exchange. The statement, issued jointly with the State Administration of Foreign Exchange (SAFE), instructs prosecutors and currency regulators to strengthen supervision over foreign exchange, with a focus on USDT, the largest stablecoin in the cryptocurrency market. The asset has been used as an intermediary in yuan transactions with other currencies, according to the statement, which urges currency agencies to "punish fraudulent purchases, illegal transactions, and other criminal activities related to currency." For authorities, including both prosecutors and currency regulators, the goal is to coordinate supervision to effectively prevent and resolve financial risks and maintain national financial security. To provide context, the statement highlighted some currency crimes involving the Tether stablecoin, including one in 2019 where a cryptocurrency trader received 22 million dirhams (around $30 million) from a Chinese-connected gambling house in Dubai. The trader then converted part of the money into USDT for resale, making a 2% profit. Another case occurred between 2018 and 2021, where a trader converted over 220 million yuan into foreign currency using Tether, resulting in a five-year prison sentence and a fine. It's worth noting that China is a pioneer in state-backed stablecoins. Since 2021, the Chinese government has been testing its CBDC (Central Bank Digital Currency), commonly known as the digital yuan. $BTC
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