Author: Mankun

Introduction

"With a turnover exceeding 100 million and monthly earnings of 1 million," the business of U commerce sounds appealing, but its high legal risks are often overlooked. A slight misstep can not only wipe out profits but also lead to criminal liability.

When your "OTC acceptance" business is deemed "illegal operation" or "aiding money laundering," the crisis has already arrived. Are you aware of:

• Which actions in your daily operations are crossing legal boundaries?
• How to distinguish between normal business activities and illegal crimes?

This article aims to dissect the crimes and penalties associated with U commerce and provide a feasible compliance plan to protect your wealth and safety.

Two Major Pitfalls for U Commerce

Many U commerce operators believe that as long as they are not directly scamming people, they are in the clear. However, there is a catch-all crime in criminal law—illegal operation. Simply put, if you engage in activities that the state clearly requires a license for, and you are thriving while severely disrupting the market, you are at risk.

For ordinary businesses, exceeding operational boundaries may only result in administrative penalties. However, if you are dealing with state monopoly or exclusive sales systems (such as foreign exchange or payment settlement), the situation escalates from "violation" to "crime" once it reaches criminal standards.

Specifically for U commerce, the two high-risk behaviors are:

1. Exchanging Fiat Currency and U

When you frequently and publicly exchange fiat currency and U for unspecified individuals without permission, you essentially become a payment channel. This is legally regarded as "illegally engaging in funds payment and settlement business."

2. Indirectly Buying and Selling Foreign Exchange

By leveraging the peg between U and the US dollar, collecting RMB domestically, and paying equivalent foreign currency abroad (or vice versa), you perfectly circumvent national foreign exchange controls, achieving cross-border exchange between RMB and foreign currency. This operation is legally classified as "indirectly buying and selling foreign exchange."

According to the 2025 standards set by the Shenzhen Public Security Bureau for prosecuting illegal operation cases, engaging in funds payment and settlement business illegally, with amounts exceeding 5 million yuan, or illegal gains exceeding 100,000 yuan, should be prosecuted; engaging in illegal foreign exchange trading behaviors that disrupt financial market order, with amounts exceeding 5 million yuan or illegal gains exceeding 100,000 yuan, should also be prosecuted.

A certain "OTC" case in Chongqing is a typical example of U commerce being classified as illegal operation. Mr. He earned a profit by buying low and selling high on USDT, with his controlled bank account accumulating a transaction volume of up to 14 billion yuan, personally profiting 4.77 million yuan. The first and second-instance courts determined that his large-scale, continuous exchange of fiat currency and virtual currency essentially constituted illegal engagement in funds payment and settlement business, ultimately sentencing him to three years in prison for illegal operation and imposing a fine of 5 million yuan.

Ordinary Player or Criminal?

In court, judges determine whether a U commerce operator is an ordinary player or a criminal primarily by examining several core operations.

1. Are you "playing dumb"?

Even if you say "I didn't know," judicial authorities will infer your subjective awareness based on your objective actions. The following situations can serve as evidence indicating that you "know full well" what you are doing.

• Using encrypted communication software like Telegram or Bat to conduct business communications
• Conducting transactions in concealed locations (such as parking lots or inside vehicles for offline transactions)
• Profits far exceeding normal levels, or transaction patterns that are clearly abnormal
• Communications containing specific jargon like "locking orders," "going through processes," or "bridging"

2. What crime does your behavior constitute?

If you are merely providing a channel for exchanging U but genuinely do not know there are issues with the funds → you may be classified as "aiding crime."

If you knowingly assist in using cash to collect U to transfer illicit funds → the nature changes to "concealment crime."

Even if you have not directly touched dirty money, if your business scale is as large as Mr. He's mentioned earlier, forming a type of operational behavior → you may face charges of "illegal operation."

Compliance Survival Guide for U Commerce

Legal risks are increasing, and compliance is no longer optional but fundamental for survival. If you want to continue operating, you must abandon the past "wild ways" and bring your business into the open.

1. Obtain a License, Embrace Regulation

A Virtual Asset Service Provider (VASP) license is an internationally recognized compliance "passport." Depending on your target market, you might consider:

• Licenses from Hong Kong or Singapore: The regulatory framework is relatively clear, making them popular compliance choices.
• EU MiCA license: Highly valuable; once approved, it allows smooth access to the entire EU market (though the threshold is high).

2. Build Internal Control and Risk Management Systems

1. Strict KYC: Verify customer identities and clarify the source of funds.
2. Robust AML system: Monitor and report suspicious transactions, using blockchain analysis tools (like Chainalysis) to track the flow of funds.
3. Establish a blacklist mechanism: Dynamically update risk addresses and proactively intercept high-risk transactions.

3. Clearly Define Compliance Boundaries for Your Business

• Absolutely avoid dirty money: Maintain a strict distance from funds sourced from gambling, fraud, etc.
• Do not engage in cross-border currency exchange: Clearly recognize that using U for exchanging RMB and foreign currency is a high-pressure line for illegal foreign exchange trading.
• Maintain transaction transparency: Avoid using encrypted software for core business discussions and refrain from concealed offline cash transactions.

From Risk Avoidance to Value Creation

U commerce is transitioning from wild growth to a regulated "open card" phase. There are two paths ahead: either passively step into pitfalls and wait to be summoned for a chat, or proactively don a "bulletproof vest" and play the compliance card for safety. How you choose will determine how far your business can go.

If you encounter the following situations, do not hesitate; it is time to consult a professional lawyer:

• You feel your business is repeatedly jumping in the "gray area," unsure when you might step on a landmine.
• You frequently receive "dirty money," your card has been frozen, or you have already received an invitation for a "chat" from authorities.
• You want to transition to a legitimate licensed institution but have no idea where to start with risk control and compliance.
• You have already been classified as involved in a case and need someone to help protect your rights and provide a strong defense.

We are not just lawyers; we are practical partners who understand Web3—conducting business compliance check-ups, building compliance systems, asset unfreezing and responses, and providing full criminal defense.

In the world of Web3, technology can be cutting-edge, but the law cannot be left blank.

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