China’s State Administration of Foreign Exchange has introduced new regulations requiring banks to intensify scrutiny of transactions involving cryptocurrencies. These measures mandate financial institutions to monitor and report “risky foreign exchange trading behaviors,” including activities related to underground banking, cross-border gambling, and unauthorized crypto transactions.
Under the new rules, banks are obligated to assess the identities of individuals and entities involved in such transactions, scrutinize their funding sources, and evaluate trading patterns. This initiative aims to curb illegal cross-border financial activities and enhance oversight of cryptocurrency-related trades.
Legal experts suggest that these regulations provide a stronger basis for penalizing crypto trading within China. Liu Zhengyao, a lawyer at ZhiHeng law firm, noted that purchasing cryptocurrencies with yuan and subsequently exchanging them for foreign currencies could be deemed cross-border activity under the new guidelines, making it increasingly challenging to bypass China’s foreign exchange regulations through crypto transactions.
Despite a nationwide ban on cryptocurrency transactions since 2019, China reportedly holds approximately 194,000 Bitcoin (BTC), valued at around $18 billion, acquired through asset seizures linked to illicit activities. This positionond-largest holder of Bitcoin globally, highlighting the complex relationship between the country’s regulatory stance and its indirect involvement in the crypto market.
