Since the birth of Bitcoin, its repeated price surges have fueled a global cryptocurrency frenzy. At its peak, Bitcoin surpassed $100,000, and the total market capitalization of cryptocurrencies even briefly exceeded the global circulation of the US dollar. This boom led to the proliferation of cryptocurrency trading platforms and the rise of over-the-counter (OTC) transactions facilitated by USDT.

Under China’s current policies, some individuals use crypto assets to privately exchange foreign currencies for RMB, profiting from exchange rate differences and service fees. While this may seem technically harmless, it operates under severe legal restrictions. Such practices may violate Article 225 of the Criminal Law (illegal business operations) and Article 191 (money laundering).

In this article, the Mankun legal team will draw on practical experience to break down: Why does cryptocurrency trading frequently cross the "cross-border currency exchange" red line? And what should you be mindful of?

Literature in related fields, both domestic and international, often uses confusing and interchangeable terms to describe crypto assets like Bitcoin—such as cryptocurrency, crypto assets, digital currency, digital assets, and virtual currency. This inconsistency stems from the lack of consensus on the nature of cryptocurrencies. Are they currencies, intangible assets, claims, or merely data representing holder rights? Judicial authorities hold varying views, and academia remains divided.

• From a civil law perspective, cryptocurrencies are neither currency nor securities. Civil legislation and judicial practice recognize their status as virtual property (Article 127 of the Civil Code), which is legally protected.

• From a criminal law perspective, cryptocurrencies qualify as "property" under Article 92 of the Criminal Law. They can be transferred for monetary consideration, generate economic benefits, and possess value, scarcity, and controllability—meeting the criteria for virtual property online. Thus, they are legally protected as a form of property.

While cryptocurrencies appear as digital or computer system data, we must look beyond their form to recognize their essence as assets or property. Bitcoin, Ethereum, and others represent the digitization of assets—their core lies in their economic value, not their data format.

For example, a ledger’s value lies not in the paper but in its recorded content. Similarly, under criminal law, trade secrets and state secrets are often represented as data. If someone steals digitized technical information or state secrets via computer networks, they may be charged with trade secret infringement or illegally obtaining state secrets—because the data represents protected interests.

In short, while crypto assets manifest as data, they represent tradable, monetizable economic value. Legally, they should be treated as digital assets with "property attributes."

In recent years, an increasing number of cryptocurrency-related cases have been classified as "disguised cross-border currency exchange," with some parties even facing criminal charges. The issue lies not in cryptocurrencies themselves but in how their transaction paths, technical features, and financial functions overlap with traditional illegal currency exchange. Specifically:

Traditional illegal currency exchange often involves underground banks, proxy purchases, or fabricated trade backgrounds. In cryptocurrency transactions, users follow paths like "RMB → Crypto → Foreign Currency" (or vice versa) to bypass official forex controls and circumvent exchange quotas.

Though these transactions don’t directly interact with banking systems, they still result in illegal RMB-foreign currency exchanges, violating Article 225 of the Criminal Law ("other illegal business activities severely disrupting market order"). Many cases have targeted crypto platforms, market makers, and intermediaries as key players in "exchange chains," sometimes leading to criminal charges.

Common features in judicial practice:

• Peer-to-peer matching without financial licenses (via communities or unlicensed platforms).

• Separation of fund flows and crypto transfers (e.g., receiving RMB domestically while releasing crypto abroad).

• Service-oriented nature (charging fees or exchange rate spreads, constituting "currency exchange services" rather than personal asset management).

This "crypto-as-a-bridge" approach essentially circumvents capital controls using technology.

• Anonymity and mixing protocols weaken KYC (Know Your Customer) compliance. Decentralization allows most transactions without实名 verification, and mixing services further obscure address-identity links, hindering regulators’ ability to trace funds.

• Borderless transactions. Crypto assets cross borders via the internet, bypassing banks, customs, or forex systems. A USDT address can send/receive assets globally without oversight, making regulation far harder than with traditional money.

• Circumventing the $50,000 annual forex quota. Some investors convert RMB to USDT, then to USD/HKD for overseas investments, homes, or cars—effectively bypassing personal forex limits as "hidden forex purchases."

• Ambiguous roles for trading platforms. Some OTC platforms provide escrow, rate mediation, or dispute resolution, crossing into "currency exchange" territory. Large transactions or profit-taking may lead to legal scrutiny as unlicensed exchange operators.

• Crypto’s payment and pricing functions partially replace RMB in cross-border scenarios, challenging its settlement dominance and potentially undermining macroeconomic controls.

• Parallel "underground financial systems." Stablecoins like USDT create gray financial networks outside banking systems, risking systemic issues if linked to gambling, fraud, or tax evasion.

• Untraceable fund flows aid illegal activities. Anonymity, mixing, and lack of oversight facilitate money laundering, terrorist financing, and other crimes—posing not just compliance risks but national security threats.

Using crypto to offer cross-border exchange services for profit constitutes disguised forex trading ("forex → crypto → RMB"), violating forex regulations. Individuals risk charges for illegal business operations.

Trading crypto effectively converts between RMB and foreign currencies, subject to China’s $50,000 annual individual forex limit (per Foreign Exchange Management Rules).

Use platforms with proper KYC and transparent records. P2P OTC trades, mixers, or privacy coins obscure fund origins, risking frozen accounts (if linked to laundering) or hacker theft.

• Students abroad: Keep admission letters, tuition invoices.

• Domestic workers: Save employment contracts, pay stubs, tax records to prove crypto trading isn’t a profession.

Cryptocurrencies aren’t inherently unlawful—the risks arise from cross-border flows, forex evasion, anonymity, and regulatory circumvention. Once tied to illegal operations, money laundering, or forex violations, these actions cross legal red lines.

Ignorance isn’t bliss: stepping into gray areas unaware is perilous. Whether you’re an investor or industry participant, understanding legal boundaries is crucial to avoiding criminal exposure.

Since the birth of Bitcoin, its repeated price surges have fueled a global cryptocurrency frenzy. At its peak, Bitcoin surpassed $100,000, and the total market capitalization of cryptocurrencies even briefly exceeded the global circulation of the US dollar. This boom led to the proliferation of cryptocurrency trading platforms and the rise of over-the-counter (OTC) transactions facilitated by USDT.

Under China’s current policies, some individuals use crypto assets to privately exchange foreign currencies for RMB, profiting from exchange rate differences and service fees. While this may seem technically harmless, it operates under severe legal restrictions. Such practices may violate Article 225 of the Criminal Law (illegal business operations) and Article 191 (money laundering).

In this article, the Mankun legal team will draw on practical experience to break down: Why does cryptocurrency trading frequently cross the "cross-border currency exchange" red line? And what should you be mindful of?

Literature in related fields, both domestic and international, often uses confusing and interchangeable terms to describe crypto assets like Bitcoin—such as cryptocurrency, crypto assets, digital currency, digital assets, and virtual currency. This inconsistency stems from the lack of consensus on the nature of cryptocurrencies. Are they currencies, intangible assets, claims, or merely data representing holder rights? Judicial authorities hold varying views, and academia remains divided.

• From a civil law perspective, cryptocurrencies are neither currency nor securities. Civil legislation and judicial practice recognize their status as virtual property (Article 127 of the Civil Code), which is legally protected.

• From a criminal law perspective, cryptocurrencies qualify as "property" under Article 92 of the Criminal Law. They can be transferred for monetary consideration, generate economic benefits, and possess value, scarcity, and controllability—meeting the criteria for virtual property online. Thus, they are legally protected as a form of property.

While cryptocurrencies appear as digital or computer system data, we must look beyond their form to recognize their essence as assets or property. Bitcoin, Ethereum, and others represent the digitization of assets—their core lies in their economic value, not their data format.

For example, a ledger’s value lies not in the paper but in its recorded content. Similarly, under criminal law, trade secrets and state secrets are often represented as data. If someone steals digitized technical information or state secrets via computer networks, they may be charged with trade secret infringement or illegally obtaining state secrets—because the data represents protected interests.

In short, while crypto assets manifest as data, they represent tradable, monetizable economic value. Legally, they should be treated as digital assets with "property attributes."

In recent years, an increasing number of cryptocurrency-related cases have been classified as "disguised cross-border currency exchange," with some parties even facing criminal charges. The issue lies not in cryptocurrencies themselves but in how their transaction paths, technical features, and financial functions overlap with traditional illegal currency exchange. Specifically:

Traditional illegal currency exchange often involves underground banks, proxy purchases, or fabricated trade backgrounds. In cryptocurrency transactions, users follow paths like "RMB → Crypto → Foreign Currency" (or vice versa) to bypass official forex controls and circumvent exchange quotas.

Though these transactions don’t directly interact with banking systems, they still result in illegal RMB-foreign currency exchanges, violating Article 225 of the Criminal Law ("other illegal business activities severely disrupting market order"). Many cases have targeted crypto platforms, market makers, and intermediaries as key players in "exchange chains," sometimes leading to criminal charges.

Common features in judicial practice:

• Peer-to-peer matching without financial licenses (via communities or unlicensed platforms).

• Separation of fund flows and crypto transfers (e.g., receiving RMB domestically while releasing crypto abroad).

• Service-oriented nature (charging fees or exchange rate spreads, constituting "currency exchange services" rather than personal asset management).

This "crypto-as-a-bridge" approach essentially circumvents capital controls using technology.

• Anonymity and mixing protocols weaken KYC (Know Your Customer) compliance. Decentralization allows most transactions without实名 verification, and mixing services further obscure address-identity links, hindering regulators’ ability to trace funds.

• Borderless transactions. Crypto assets cross borders via the internet, bypassing banks, customs, or forex systems. A USDT address can send/receive assets globally without oversight, making regulation far harder than with traditional money.

• Circumventing the $50,000 annual forex quota. Some investors convert RMB to USDT, then to USD/HKD for overseas investments, homes, or cars—effectively bypassing personal forex limits as "hidden forex purchases."

• Ambiguous roles for trading platforms. Some OTC platforms provide escrow, rate mediation, or dispute resolution, crossing into "currency exchange" territory. Large transactions or profit-taking may lead to legal scrutiny as unlicensed exchange operators.

• Crypto’s payment and pricing functions partially replace RMB in cross-border scenarios, challenging its settlement dominance and potentially undermining macroeconomic controls.

• Parallel "underground financial systems." Stablecoins like USDT create gray financial networks outside banking systems, risking systemic issues if linked to gambling, fraud, or tax evasion.

• Untraceable fund flows aid illegal activities. Anonymity, mixing, and lack of oversight facilitate money laundering, terrorist financing, and other crimes—posing not just compliance risks but national security threats.

Using crypto to offer cross-border exchange services for profit constitutes disguised forex trading ("forex → crypto → RMB"), violating forex regulations. Individuals risk charges for illegal business operations.

Trading crypto effectively converts between RMB and foreign currencies, subject to China’s $50,000 annual individual forex limit (per Foreign Exchange Management Rules).

Use platforms with proper KYC and transparent records. P2P OTC trades, mixers, or privacy coins obscure fund origins, risking frozen accounts (if linked to laundering) or hacker theft.

• Students abroad: Keep admission letters, tuition invoices.

• Domestic workers: Save employment contracts, pay stubs, tax records to prove crypto trading isn’t a profession.

Cryptocurrencies aren’t inherently unlawful—the risks arise from cross-border flows, forex evasion, anonymity, and regulatory circumvention. Once tied to illegal operations, money laundering, or forex violations, these actions cross legal red lines.

Ignorance isn’t bliss: stepping into gray areas unaware is perilous. Whether you’re an investor or industry participant, understanding legal boundaries is crucial to avoiding criminal exposure.