The judicial evolution of USDT to RMB exchange from "mandatory penalties" to "precise judgment"

Virtual currency-related cases are becoming a hot topic in judicial practice, especially regarding the legal characterization of USDT trading and virtual currency arbitrage (“搬砖套利”), which has sparked widespread legal controversy. From the direct classification of the “Zhao Dong case” in 2022 as illegal business activity, to the detailed analysis of the “Lin case” in 2024, and to the in-depth discussions by judicial authorities in 2025, we can clearly see that: judicial practice is shifting from simple application of charges to meticulous analysis of the essence of behaviors, and the legal recognition of USDT exchange for RMB is also continuously evolving.

Three Years of Judicial Practice Changes: From Rough Classification to Fine-Grained Recognition

Zhao Dong Case: The Initial “One-Size-Fits-All” Classification

In 2022, the Zhao case handled by the People’s Court of Xihu District, Hangzhou City, Zhejiang Province, became a representative example of classifying cross-border arbitrage through virtual currency trading as illegal business activity. This case was jointly listed by the Supreme People’s Procuratorate and the State Administration of Foreign Exchange as a typical case for cracking down on foreign exchange-related illegal crimes.

At that time, the official case briefing pointed to a relatively simple logic: any behavior involving cross-border arbitrage, earning exchange rate differences, and involving foreign currency exchange across different countries via USDT and other virtual currencies could be considered within the scope of illegal business activity. This “broad brush” classification was widely applied in judicial practice at the time.

However, it is worth noting that this case had a final judgment over four years ago, and cases involving virtual currencies have long lacked clear legislative rules. The handling path in judicial practice was more about gradually exploring based on relevant policy guidance. This led to a key issue: whether early judicial standards were stable and reproducible, becoming a question later case handlers needed to consider.

Lin Case: Re-discovering the Substance of the Behavior

Moving into 2024, the “Lin and Yan illegal business case” released by the Jianhu County Procuratorate in Jiangsu Province provided a new perspective. Its value lies in clearly defining the true reason for criminalizing USDT trading behavior.

From the case details, Lin appeared to be engaged in “搬砖套利”—receiving funds from abroad, exchanging them via virtual currency platforms, and selling USDT to domestic traders at a certain price difference to earn profits. But in reality, Lin was operating under instructions from a Nigerian individual, completing the entire fund transfer process as arranged by the other party. This means that, in this context, virtual currency was not the object of the transaction but a tool for fund transfer.

The core insight is: the issue is not the form of “搬砖套利” itself, but its real business model—whether the actor substantially provides “matching exchange” services for others. If yes, the nature of the behavior fundamentally shifts from “arbitrage” to “illegal business activity.” This shift in understanding marks the beginning of a focus in judicial practice on the essence of behaviors and transaction structures.

Shanghai Second Intermediate Court’s Discourse: Establishing Fine-Grained Judgments

On December 17, 2025, the Shanghai Second Intermediate People’s Court issued a summary document further deepening this discussion. It listed two typical scenarios related to illegal business crimes involving virtual currencies and provided more cautious analysis of criminality.

Particularly noteworthy points include:

• For individual holding and trading behaviors, if they do not exhibit characteristics of business operations, they are generally not recognized as illegal business; but if they knowingly assist others in illegal foreign exchange transactions, they may be considered accomplices.

• If the behavior has characteristics of regularity, profitability, and other business features, and the actor knowingly provides virtual currency services to facilitate RMB-USD exchanges outside designated trading venues, it may constitute disguised foreign exchange trading, thus falling under illegal business activity.

This indicates that judicial practice is increasingly paying attention to detailed analysis of the behavior’s essence, transaction structure, fund flow, and social harm, rather than merely transaction frequency or scale.

The Substantive Boundary Between Crime and Non-Crime: Accurate Understanding of Business and Profit Motives

In specific judicial practice, whether USDT exchange for RMB constitutes illegal business activity hinges on two core elements:

First, the business nature of the behavior. In criminal law, “business activity” generally refers to conduct where the actor, based on planning, organization, and management, continuously provides goods or services to the market, maintains participation in market exchanges, and aims to profit from it. In contrast, sporadic, individual transactions are generally not considered “business.”

Second, the profit motive. This is not merely about whether profit is made but whether the actor’s primary goal is profit, and whether they consciously organize and manage the activity.

Based on these two core elements, more specific judgment standards can be further subdivided.

Four Key Points for Analyzing USDT Transactions

1. Occasional vs. Continuous Transactions

Not constituting illegal business: Occasional, non-continuous transactions with no fixed counterparties, timing, or prices. These are personal, scattered investment behaviors.

Potentially constituting illegal business: Long-term, stable, organized transactions with fixed clients or partners, even forming clear groups. These features suggest an explicit business intent.

2. Nature of Profit Sources

Not constituting illegal business: Profits derived from price fluctuations of virtual currencies across different markets or platforms. The behavior is essentially market arbitrage, not service provision.

Potentially constituting illegal business: Profits mainly from exchange rate differences, fixed fees, or commissions. This profit model indicates the actor is taking a cut from currency exchange activities, rather than engaging in independent market trading.

3. Fund Flow Characteristics

Not constituting illegal business: Funds and virtual currencies flow in a unidirectional cycle within personal accounts—“fiat→virtual currency→fiat.” This indicates transparent fund flow and independent accounts.

Potentially constituting illegal business: Use or borrowing of large amounts of others’ accounts to form a de facto fund pool, achieving matching and hedging of domestic and foreign funds. Such features are typical of “underground payment” models.

4. Subjective Intent

Not constituting illegal business: The actor does not execute “foreign currency↔virtual currency↔RMB” exchanges on behalf of others according to instructions, does not substantially provide cross-border payment services, and is not knowingly assisting in illegal currency exchange.

Potentially constituting illegal business: The actor knowingly assists others in illegal foreign exchange transactions or disguised transactions, or colludes with others in advance to perform matching exchanges.

Is Charging a Service Fee Inevitable for Crime? Practical Interpretation

In virtual currency arbitrage, a common question is: if the actor not only earns from exchange rate differences but also charges an additional “service fee” or “commission,” does this necessarily constitute illegal business activity?

The answer is not simply “yes” or “no.” It depends on the substantive nature of the fee.

If the fee corresponds to genuine, independent arbitrage transactions— that is, even with a fee, the actor does not perform the complete “foreign currency↔virtual currency↔RMB” exchange as required by others, does not utilize virtual currency for matching exchanges, and does not realize direct currency value transfer—then, legally, it should not be considered illegal business.

However, in practice, such behaviors carry significant criminal risks. Different jurisdictions and case handlers may have varying understandings, and misjudgments are common. The Zhao Dong case’s model was classified as illegal business precisely because of this risk of “one-size-fits-all” judgment.

Key Evidence Points in Practical Cases

When handling cases involving USDT exchange for RMB, the defense’s core strategy is to use evidence to clarify the true nature of the case, distinguishing “independent trading” from “providing exchange services.”

First, decompose the transaction structure: Are there key features like “being instructed by others,” “providing payment services for specific targets,” or “acting as a fund transfer channel”? If not, even frequent or large-scale transactions with fee collection do not necessarily constitute a crime.

Second, demonstrate independence: Evidence should show that the actor’s trading decisions are autonomous, prices are independently determined, and counterparties are diverse, not following a fixed pattern dictated by others.

Third, exclude subjective knowledge: Under criminal proof standards, it must be proven that the actor was not aware of others’ matching exchange activities, and cannot be presumed to “should have known.” This is essential for establishing accomplice liability.

Fourth, clarify profit sources: Provide sufficient evidence that profits come from market fluctuations themselves, not from commissions on others’ exchange activities. For the actor, virtual currency is a trading object, not a fund transfer tool.

Practical Tips and Risk Assessment for Lawyers

For participants involved in USDT exchange for RMB and virtual currency arbitrage, this remains a highly risky and uncertain area.

Risks are multifaceted: Policy adjustments are ongoing; judicial understanding varies across regions and personnel, directly affecting criminal classification and sentencing.

Differences in judicial cognition are objective: Even at the same time, different courts may reach different decisions on similar cases. This uncertainty is the greatest risk.

Overall view: The behavior of USDT exchange for RMB and virtual currency arbitrage still belongs to a high-risk gray area. From both policy and judicial perspectives, activities should be carefully evaluated. Participants should fully understand potential risks and act cautiously, avoiding rash involvement.

For those already involved in related cases, seeking professional legal assistance promptly, conducting systematic evidence analysis and legal reasoning, and striving for the most favorable outcome within the existing judicial framework is the best course of action.