Legal Risks and Feasible Methods of Crypto Assets Exchange

Recently, some users have inquired about the legal risks and practical methods for exchanging Crypto Assets (especially USDT). This article will briefly introduce the legal risks and feasibility of several existing exchange channels, aiming to help ordinary users use and dispose of crypto assets legally and compliantly.

It should be specifically noted that this article is intended only for ordinary users whose sources of funds are legal, and who purchase and hold Crypto Assets solely for personal daily consumption and normal investment activities. All methods mentioned in this article are based on information obtained during the process of providing legal services to clients, with no conflicts of interest, and are for reference only.

1. Licensed Crypto Asset Exchanges and Brokerage Channels in Hong Kong

Currently, the Hong Kong Securities and Futures Commission has granted licenses to 7 Crypto Assets exchanges (or operating entities), demonstrating the vigorous development of Crypto Assets in Hong Kong. Based on practical experience, exchanging through Hong Kong channels is a relatively legal and compliant method with lower legal risks. However, it should be noted that currently, Crypto Assets such as USDT cannot be directly traded on licensed exchanges and need to be facilitated through BTC/ETH spot channels.

Taking a licensed exchange as an example, behind it is a fully licensed broker with multiple licenses. This exchange can legally use the Hong Kong BTC/ETH spot channels to help users convert USDT into BTC, ETH, or other fiat currencies, with a short trading cycle and minimal impact from market financial risks. After the conversion is completed, the funds (Hong Kong dollars or US dollars) will be transferred to a bank account in Hong Kong.

The advantages of this method are good compliance, clear funding channels, low possibility of receiving illegal funds, and basically no risk of freezing bank cards. The disadvantage is that currently residents of the mainland cannot directly open Crypto Assets trading accounts, and may need assistance from overseas relatives or friends; additionally, it may require a personal visit to Hong Kong to open a bank account, which is relatively cumbersome for small exchanges.

2. Mainstream Exchange OTC Exchange

Exchanging through over-the-counter (OTC) methods provided by certain major exchanges has a lower cost, and users can open accounts and operate on their own. However, it is important to note that this channel has currently become one of the easiest channels to receive illegal funds. If illegal funds are received, not only may the bank card be frozen and the funds become unusable, but there may also be the risk of judicial penalties.

If you choose this method, it is recommended to carefully review the trading records and evaluations of the counterpart's platform, select a counterparty with a high reputation for trading, and avoid counterparties with poor trading reputations or abnormal trading records.

3. Crypto Assets Debit Card (U Card)

The overall compliance issue of U cards is not significant, and some U cards can even be linked to mainstream payment applications. However, U cards also carry risks. Currently, there are many Mastercard or UnionPay U cards on the market, with relatively safe sources of funds. However, there are many card-issuing agents, so it is necessary to choose a reliable service provider that complies with KYC (Know Your Customer) procedures.

It should be noted that some U-card service providers may suddenly stop their services. This year, users reported that their U-card service provider abruptly ceased to provide services for users in mainland China, resulting in funds being inaccessible and causing numerous troubles.

4. Coin Exchange

The risks of exchanging through coin dealers are similar to those of OTC withdrawals from exchanges, as there is a possibility of receiving funds from unknown sources, which may result in the freezing of bank cards or being required to provide testimony as a witness. In extreme cases, users have been investigated as suspects (accomplices) due to multiple exchanges through coin dealers.

Overall, the risks of exchanging through coin dealers are relatively high, and it is not advisable to trust so-called "frozen card guarantees" or "frozen card compensation" promotions. If you do not have a very reliable and familiar partner, it is not recommended to choose this method of exchange.

5. Hong Kong Offline Exchange

This method usually requires a bank card from overseas (including Hong Kong). There are two types of physical exchange points in Hong Kong: ATMs and offline small shops. Generally, these small shops do not register customer information for daily transaction amounts below 120,000 HKD; transactions exceeding 120,000 HKD will require a simple KYC procedure, with handling fees typically fluctuating around 4%.

For ordinary users whose sources of funds are legitimate and who purchase and hold Crypto Assets solely for personal daily consumption and normal investment activities, this is a low-cost and convenient channel. However, there is also a risk of receiving illegal funds, and it is recommended to exchange at more stable and long-established stores such as Mong Kok or Tsim Sha Tsui to reduce risks.

Conclusion

It is important to emphasize that there is currently no absolutely secure and perfect crypto asset exchange solution. Even the several solutions mentioned in this article still carry risks such as receiving illegal funds and high transaction costs. Users are advised to consider carefully before exchanging to avoid making hasty decisions.