TechFlow reports that People's Daily today published an article co-authored by Dan Zhiguang, chairman of BSN, and He Yifan, general manager of Hongzao Technology, titled "Returning to the Origin III: Legal Analysis of Holding and Trading 'Virtual Currency' in China." The article points out that when holders use RMB to purchase "virtual currency" within China and then sell it in any form to cash out in foreign currencies, or when holders use foreign currencies to purchase "virtual currency" overseas and then sell it in any form to cash out in RMB, in either case—regardless of how many intermediary cryptocurrency-to-cryptocurrency transactions occur between purchase and sale—the activity fundamentally violates China's foreign exchange control regulations and is suspected of money laundering. Chinese citizens who sell and cash out their "virtual currency," irrespective of location or currency involved, must declare personal income tax to Chinese tax authorities if any profit is made; failure to file such tax declaration constitutes suspected tax evasion. Additionally, if a Chinese citizen knowingly sells his or her "virtual currency" to another party, thereby indirectly assisting that party in illegally moving funds across borders, such conduct also constitutes suspected money laundering; if the other party’s funds are themselves derived from illegal activities, additional criminal liabilities may arise.
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