The Legal Truth Behind USDT Trading: Wallet Download and Risk Prevention Guide

To participate in virtual currency trading, the first step is often to download a USDT wallet. However, in China, the legality of USDT trading has always been in question. Instead of worrying about whether buying and selling USDT is illegal, it’s better to clarify the legal framework and actual risks behind this issue.

How is the legal status of USDT defined in China?

Legally, the buying and selling of USDT itself has not been explicitly prohibited. But this does not mean it is “completely legal”—more accurately, it exists in a gray area.

On September 4, 2017, China issued the “Announcement on Preventing Risks of Token Issuance Financing,” which halted all forms of ICO fundraising activities. Liu Quan, director of the CCID Blockchain Research Institute, explicitly stated: “As long as game coins and tokens are issued and traded domestically, it is considered illegal.” Although USDT is a stablecoin issued by Tether, it is not a token issued within China.

This creates a phenomenon: USDT, as one of the most traded stablecoins globally, shares the market with Bitcoin and Ethereum. Currently, the only officially recognized digital currency in China is the Digital Currency Electronic Payment (DCEP) issued by the central bank. From this perspective, individual buying and selling of USDT is not explicitly prohibited by law, but large-scale trading through exchanges is strictly regulated.

Core risks individuals need to be aware of in trading

While the buying and selling of USDT has not been clearly defined as illegal, participating in it still involves multiple legal risks. These risks often do not stem from the trading activity itself but from the counterparties and the purpose of the transactions.

The most common risk is money laundering. Many OTC (over-the-counter) traders fear receiving illicit funds. If upstream criminals are caught by police, accounts involved in receiving dirty money are highly likely to be frozen, and sellers themselves risk detention or arrest. Such account freezing incidents frequently occur in USDT trading, and almost all OTC trades carry this hidden danger.

Source of funds is even more complicated. If a buyer uses funds obtained from scams, drugs, pornography, or gambling to purchase USDT, and the buyer is subsequently caught, the seller can also be implicated. Authorities may detain or investigate the seller under charges such as money laundering, illegal business operations, or disguising criminal proceeds—even if the seller is unaware of the origin of the funds.

Large exchanges also carry risks. Converting large amounts of USDT into USD or purchasing prohibited items can trigger account freezes.

The importance of choosing and securing USDT wallets

Since participating in USDT trading involves objective risks, selecting secure tools is crucial. When downloading a USDT wallet, pay attention to the following:

Choose official and reputable wallets. Avoid downloading unknown or unverified wallet applications, as they may contain malicious code that threatens your assets. Popular USDT wallets include imToken, Ledger, MetaMask, among others, all of which have official websites and app store links.

Properly manage private keys and seed phrases. When first setting up a wallet, the system will generate a private key or seed phrase. This is the only way to access your account. If leaked, your assets could be permanently lost. Never screenshot, write down, or share your private keys with anyone.

Thoroughly verify counterparties. Even with a secure wallet, always conduct thorough due diligence before trading. Be aware of OTC risks and avoid trading unknown coins just for convenience or lower prices.

Risks and legal consequences of OTC freezing accounts

OTC trading is the most common form of USDT exchange but also the riskiest.

If an account is frozen due to money laundering, legally, merely selling coins may not entail criminal liability. However, subsequent handling becomes very complex. First, you must provide transaction records and bank statements to authorities to prove innocence; second, police may seize and recover funds considered proceeds of crime, returning them to victims. The virtual currency you transferred to criminals cannot be recovered—placing sellers at a significant disadvantage.

If authorities have evidence that the seller “knew” the funds’ illegal origin, the situation escalates to criminal liability, including charges like money laundering, illegal business operations, or even joint criminal conduct with upstream criminals, potentially leading to detention, arrest, and imprisonment.

Current understanding of virtual currency trading in 2025

By 2025, the legal status of virtual currencies remains fundamentally unchanged. Regulatory authorities still do not interfere with legitimate trading, and trading remains relatively free. But this “non-interference” presupposes that transactions do not involve illegal purposes.

Specifically:

• Personal buying and selling of USDT alone is not illegal.
• If involved in money laundering, scams, or illicit funds, it becomes complicity.
• Authorities can trace transaction chains to determine whether illegal activities are involved.
• Once illegal conduct is confirmed, participants face severe sanctions.

Although USDT is operated by Tether, with issues like over-issuance, abuse, and lack of transparency, it remains the most traded stablecoin after Bitcoin and Ethereum. Due to its widespread participation and high trading volume, regulation and risk management are even more necessary.

The final advice is: if you intend to participate in USDT trading, start by downloading official wallets, safeguard your private keys, carefully select trading counterparts, and avoid receiving illicit or scam funds. With such cautious practices, virtual currency trading can be a relatively safe investment option; otherwise, it may lead to legal troubles.