Many cases involving USDTover-the-counter (OTC) trading and cross-border currency exchange do not begin with the broad label of “virtual currency crimes,” but rather with a frozen bank account.
Many clients and their families are puzzled: he merely helped a friend exchange USDT (Tether) a few times and earned a small spread; he did not operate an exchange, nor did he defraud anyone, so how did this become a criminal offense?
When the transactions are examined in detail, the issue is far from simple. A party within mainland China transfers renminbi (RMB), and the individual, as agreed, transfers USDT to an overseas address; after receiving the USDT, an overseas party delivers U.S. dollars, Hong Kong dollars, or other foreign currencies to a person designated by the client. Or the reverse occurs: foreign currency is received overseas first, and RMB is then transferred within mainland China to a designated account. On its face, each step may be described as buying, selling, or transferring USDT, but what is ultimately completed through the transaction is the conversion of value between RMB and foreign currency.
This is the key issue in cases involving USDT-based currency exchange.
An individual’s occasional disposition of their own virtual assets is not the same as regularly acting on behalf of others to collect and make payments and to settle currency exchanges. Criminal risk typically does not arise from “holding USDT,” but from “beginning to resolve for others how funds move from within mainland China to abroad, and from foreign currency to RMB.”
How USDT Becomes a Currency-Exchange Instrument
Traditional underground banks engage in illegal exchange between RMB and foreign currencies. In the USDT context, the form has changed, but the function may remain the same.
The most common pathway is exchanging domestic RMB for overseas foreign currency. The client transfers RMB within mainland China to a USDT dealer or intermediary, who then sends USDT to an overseas address; an overseas partner subsequently delivers U.S. dollars, Hong Kong dollars, or other foreign currencies to the client or a person designated by the client. On its face, the intermediate steps involve buying, transferring, and selling USDT; but what the client ultimately accomplishes is converting RMB into overseas foreign currency.
The reverse operates similarly. After receiving U.S. dollars or other foreign currencies, an overseas party transfers USDT to a domestic intermediary, who then transfers RMB to a designated recipient. While the banking system may not show a direct cross-border remittance, the value has already been offset through on-chain assets and domestic accounts.
The 2019 judicial interpretation issued by the Supreme People’s Court and the Supreme People’s Procuratorate on criminal cases involving the illegal engagement in fund payment and settlement services and the illegal buying and selling of foreign exchange addressed “disguised trading in foreign exchange”: where there is no direct purchase or sale of RMB against foreign exchange in form, but currency value conversion is achieved through other means, such conduct may be characterized as disguised trading in foreign exchange; cross-border fulfillment of funds is one typical manifestation.
On February 6, 2026, the People’s Bank of China and seven other departments issued Document No. 42 [2026] of the People’s Bank of China, which further addresses virtual asset-related business activities,Stablecoinsand the tokenization of real-world assets (RWA) are incorporated into the framework for risk prevention and disposal. This document provides the regulatory background; however, in the context of criminal cases, it cannot be simplistically summarized as: any involvement with virtual assets necessarily constitutes a crime.
In judicial practice, the key consideration is the function performed by the transaction within the fund chain. If an individual merely sells USDT they hold, and the counterparty, source of funds, receipt path, and purpose of the transaction can be clearly explained, although they may encounter account risk control measures, civil disputes, or administrative regulatory issues, this does not automatically equate to a criminal offense.
Risk escalation typically occurs in another structure: where you engage over a long period through communities, acquaintances, or platforms in OTCillegal payment-settlement schemes, frequently receiving funds and releasing crypto assets to earn spreads, handling fees, or channel fees; clients approach you not to invest in USDT, but to convert onshore RMB into offshore USD or HKD, or to cash out offshore funds into onshore RMB. At this stage, USDT is not merely the subject matter of the transaction, but becomes an intermediary instrument for cross-border fund conversion.
Therefore, the issue is not whether USDT itself constitutes foreign exchange, but whether you have used it as a tool for currency exchange.
When USDT merchants are investigated, authorities typically examine four aspects.
Many USDT merchants initially intend only to earn spreads. They buy USDT at low prices and sell at high prices, profiting from market fluctuations, bid-ask spreads, and information asymmetry. This model is not uncommon, and precisely because it is common, many people underestimate its criminal risks.
Although both scenarios involve "buying and selling USDT," in some cases individuals merely need to explain the source of funds after their bank accounts are frozen, while in others they are scrutinized under charges such as illegal business operations, concealing or disguising the proceeds of crime, aiding information network criminal activities, or money laundering. The distinction lies not in the term "USDT," but in the specific function you ultimately perform.
Law enforcement agencies typically do not look at a single order in isolation, but rather consider four categories of facts collectively.
First, whether the transactions are professionalized. If the activity is not an occasional disposal of personal assets, but involves long-term, public acceptance of orders, with the rotational use of multiple bank cards, multiple exchange accounts, and multiple wallet addresses, the character of "personal trading" in the case weakens, while the character of a continuous exchange business strengthens.
Second, whether client demand points to cash-out services. Clients do not simply approach you to buy USDT, but rather seek your assistance in resolving issues such as "how to transfer RMB offshore," "how to repatriate offshore USD to China," "how a certain client can make payment," or "how to split a sum of money." In such circumstances, you are not handling an ordinary transaction, but rather facilitating a fund flow path.
Third, whether the profits derive from acting as a payment channel. If what you receive is not the normal bid-ask spread from buying and selling, but rather fees charged based on transaction amount, exchange rate points, or successful settlement outcomes, then your profits are not merely trading spreads; they more closely resemblechannel fees。
Fourth, whether the flow of funds and the flow of crypto assets are separated. For example, Party A in mainland China provides you with RMB, while Party B overseas receives USDT; Party C overseas provides you with foreign currency, while Party D in mainland China receives RMB. The payer, payee, crypto asset purchaser, and actual beneficiary are often not the same person, with intermediaries such as introducers, cardholders, runners, and overseas partners involved in between. The longer the chain, the more likely it is to be construed as fund settlement akin to an underground bank.
Abnormal profits and unusual communications also amplify risks. Exchange rates significantly above market levels, frequent changes to receiving accounts, requests to split payments, emphasis on "no remarks," "do not ask about the source," or "use clean cards," as well as continuing transactions after having bank cards frozen, will all serve as evidence supporting a presumption of subjective knowledge.
Ordinary investors should not turn their personal needs into payment channels
The area where ordinary investors most easily misjudge situations is by conflating personal fund arrangements with providing currency exchange services for others.
For instance, if an individual is studying abroad and needs to pay tuition and living expenses, the proper course is to purchase foreign exchange and remit funds through banks, while retaining materials such as admission letters, payment notices, lease agreements, and overseas school account details. Foreign trade enterprises with genuine trade-related payment and receipt needs should likewise establish a complete chain of evidence centered on contracts, invoices, customs declarations, logistics records, paying entities, and receiving entities.
However, if an individual begins processing funds for different clients—converting their RMB into USDT and helping them convert it into USD overseas; or converting overseas clients' USDT into RMB and transferring it to designated domestic accounts; or, under the guise of "tuition payment," "overseas investment," or "remittances to friends and relatives," actually providing large-scale, frequent, fee-based settlement services to unknown clients—this no longer constitutes personal need.
The annual facilitated foreign exchange quota for individuals is not a tool for bypassing regulatory oversight to operate as a fund channel. When amounts are large, frequencies are high, and involved parties are complex, the explanation required goes beyond "I wanted to buy crypto assets" to address why the funds had to flow in this manner, why the payer and the person with the actual need were not the same individual, and why you collected fees in the process.
For ordinary investors, a relatively safe and straightforward bottom line is: do not receive or make payments on behalf of others; do not use your bank cards, exchange accounts, or wallets to intermediate funds for others; do not publicly advertise services such as "buying/selling USDT," "cross-border arrivals," or "large-sum currency exchange" on social media or in community groups; and do not place yourself in the position of a fund channel for the sake of minor exchange rate differences.
Beyond illegal business operations, one must also examine whether the funds are illicit
Risks associated with cross-border currency exchange are only one aspect. The more troublesome aspect of over-the-counter (OTC) USDT trading is that it is frequently commingled with funds derived from fraud, online gambling, illegal payment-settlement schemes, and money laundering.
After funds from telecom fraud or online gambling enter bank accounts, they are often subject to payment stoppages and freezing measures. Upstream criminal syndicates, in an effort to transfer these funds out, convert them into cash, gold, virtual assets, or rapidly disperse them through multiple accounts. Due to its fast transfer speeds, cross-border convenience, and the ability to frequently change addresses, USDT has become a common instrument.
At this stage, USDT merchants, over-the-counter (OTC) intermediaries, individuals tasked with withdrawing cash, and bank card holders face risks that extend beyond mere illegal business operations.
Regarding the crime of concealing or disguising the proceeds of crime, the key inquiry is whether you knew or should have known that the funds originated from crimes such as fraud or online gambling, yet still assisted in their transfer, acquisition, or sale on behalf of others. Abnormally anomalous transaction prices, unclear counterparty identities, frequently changing payment accounts, continuing transactions after repeated account freezes, and chat records containing phrases such as “do not ask about the source,” “process in batches,” “the card must be clean,” or “help the client launder” will significantly heighten the risk of being found to have subjective knowledge.
For the crime of aiding information network criminal activities, the focus is on whether, knowing that others were using information networks to commit crimes, you still provided bank cards, payment accounts, QR codes for receiving payments, exchange accounts, wallet addresses, technical interfaces, or other assistance. The crux here is not your understanding of blockchain technology, but whether you provided usable fund channels or account tools to upstream criminal activities.
The assessment for money laundering offenses goes further. The type of upstream crime, the source of funds, the identity of the actor, and whether there were acts to conceal or disguise the source and nature of criminal proceeds all influence the determination of charges. In cases involving crypto assets, many parties initially claim, “I did not know the money was illicit.” However, investigative authorities do not rely solely on such statements; instead, they examine transaction frequency, pricing, counterparties, communication content, account arrangements, and methods of profit.
Therefore, the true objective of prevention is not merely avoiding a specific charge, but ensuring that you do not become the person in the fund flow who says, “However others arrange it, I can help handle it.”
Parties and their families should first clarify four matters
Once such cases enter criminal proceedings, families most frequently ask two questions: Does buying or selling USDT constitute a crime? Can one claim ignorance?
What is truly useful is not to argue an abstract conclusion externally, but to reconstruct the factual structure. This can begin by preparing four tables.
The first is a role table. Is the party an ordinary buyer of crypto assets, a seller, a USDT merchant, an intermediary, a bank card holder, a courier for cash withdrawal, an overseas contact, or an organizer? Did they merely complete a single transaction, or did they engage in long-term order matching? Did they determine prices, arrange accounts, allocate funds, or liaise with overseas personnel?
The second is a fund flow table. From which account did the RMB originate? To which address were the foreign currency or USDT transferred? Were the payer, payee, buyer of crypto assets, and actual beneficiary the same person? Were there third-party payments, split payments, orcross-border offsetting arrangements, cash handovers, and acting as an agent for collection and payment?
The third document is the income statement. Does it reflect normal price spreads, or does it include handling fees, rebates, commissions, and channel fees? Are these amounts significantly higher than normal market levels? Are points charged based on the foreign exchange amount?
The fourth document is the communication evidence table. Subjective knowledge cannot be established merely by stating, “He said he did not know.” Chat records, group announcements, transaction remarks, counterparty scripts, prior experiences of frozen bank cards, platform risk-control alerts, abnormal prices, false identities, and frequent card changes will all be used to determine whether the party knew or should have known of the risks.
If the party indeed had legitimate purposes, relevant materials may be provided. Examples include documentation related to studying abroad, medical treatment, trade, wage income, contracts and invoices, logistics and customs declarations, and statements of overseas accounts. Such materials may not directly determine innocence, but they will influence the understanding of the transaction purpose and the source of funds in the case.
If bank cards have already been frozen, if a summons has been issued, or if a criminal investigation has been initiated, first organize bank card statements, exchange records, on-chain transaction hashes, wallet addresses, chat records, counterparty identities, pricing, and methods of profit. A transaction hash is the unique identifier for that on-chain transaction, which can subsequently be used to verify the origin and destination of the crypto assets and whether they were further split or transferred.
Do not hastily summarize all facts with the statement, “I was only buying and selling crypto assets,” and do not indiscriminately return money, admit liability, or contact counterparties before clarifying the stage of the case. Cases involving crypto-related foreign exchange ultimately focus on the person, the funds, and the evidence: whether you were dealing with your own assets or handling others’ funds; whether you were conducting an occasional transaction or providing a payment channel on a long-term basis; whether your profit came from normal price spreads or from foreign-exchange handling fees; whether you can clearly explain the counterparty, the source and destination of funds; and whether you continued the transactions despite being aware of abnormalities.
USDT is merely a tool. The real problem arises when it is used to circumvent foreign-exchange controls, facilitate cross-border settlements, transfer proceeds of crime, or conceal the source of funds.
For ordinary investors and USDT merchants, the boundary is clear: do not position yourself as an interface for underground banks; do not allow your accounts and wallets to be used for others’ fund flows; and do not trade a small foreign-exchange spread for an unclear criminal risk.
If you or your family members are already under investigation for issues related to USDT transactions, over-the-counter (OTC) trading, cross-border currency exchange, frozen bank cards, frozen exchange accounts, illegal business operations, concealment or disguise of criminal proceeds, or money laundering, the first step is not to seek a simple answer online, but to clearly organize the transaction role, fund flows, crypto-asset flows, chat records, account statements, transaction hashes, and methods of profit.
Mankun Law Firm’s criminal defense team has extensive experience handling cases involving virtual assets, OTC trading, frozen bank cards, illegal business operations, concealment or disguise of criminal proceeds, aiding information network criminal activities, and money laundering. The team can help parties and their families conduct an initial factual review: whether the transaction constitutes personal trading, professional USDT merchant activity, or has been interpreted by investigating authorities as a cross-border settlement channel; whether the source of funds involves risks related to fraud or gambling; and what materials should be supplemented and what erroneous actions should be avoided at the current stage.
The boundaries in criminal cases involving crypto assets ultimately depend on these facts. The clearer the chain of facts is presented at an early stage, the more likely it is that room for defense will be recognized later.
