(Yicai) July 18 -- A Shanghai court has made public a case in which stablecoins were used to facilitate illegal foreign‑exchange trades totaling CNY6.5 billion (USD905 million), according to a media report.

Over the space of three years, two individuals in China had clients deposit Chinese yuan into designated onshore accounts while accomplices abroad put the equivalent in foreign currency into the clients’ overseas accounts, with the ring pocketing a fee for each transaction, China Times reported on July 14. Stablecoins such as Tether were used as the means of exchange.

The issuance, trading, and exchange of all cryptocurrencies and stablecoins, which are a type of cryptocurrency, are banned in the Chinese mainland.

“This illegal exchange mechanism splits what should be a single, regulated forex transaction into two separate operations, thereby evading regulatory oversight,” the report quoted Gao Yongfeng, a senior partner at Shanghai Jinli Law Firm, as saying.

Similar schemes have emerged in Beijing, Chongqing, and other Chinese cities, often involving sums in the hundreds of millions or even billions of yuan. In many cases, stablecoins are the instruments of choice, as unlike volatile cryptos like Bitcoin, they maintain a roughly fixed value, reducing price‑risk in the transaction process.

Tether is the world's first cryptocurrency pegged to the US dollar, with USDT1 equivalent to USD1, so its price barely moves during transactions, the report said, citing an executive at a platform licensed for digital currency trading in Hong Kong.

Hong Kong will launch a licensing system for companies that issue stablecoins tied to fiat currencies next month. The special administrative region has been accepting applications for permits to operate stablecoin trading platforms since June 2023.

Gao pointed out that illegal exchangers profit not only from transaction fees but also from arbitrage, buying low and selling high in the stablecoin markets.

Criminal gangs usually charge 1 percent to 3 percent for their services, far more than bank rates, according to the head of international business at a large bank in Shanghai.

In a case in Chongqing, an individual was found to have charged nearly CNY4.8 million (USD664,400) for facilitating transactions worth a total of CNY14 billion (USD2 billion), the report said.

While illegal foreign exchange services may seem convenient, they carry huge hidden risks, Gao noted. They operate entirely outside the regulatory system, leaving participants with no legal recourse in disputes or scams; they fuel illicit cross‑border capital flows, undermining national financial security; and those taking part risk prosecution, he said.

Chinese courts have been rapidly publishing related verdicts, signaling that the state is intensifying its crackdown on these crimes, the report said, citing a staffer at a judicial authority in Shanghai.

Editor: Futura Costaglione