China has imposed new forex regulations that will force banks to closely monitor and report transactions involving crypto assets, further escalating the country’s years-long crackdown on cryptocurrency activities. The measures are intended to rein in illegal cross-border financial activities such as underground banking, cross-border gambling, and crypto trading.
In accordance with the 31 December report from the South China Morning Post, the new rules put additional pressure on Chinese banks to trace and declare possible risky forex trading by indicating specific participants in persons and organizations and the source of funds; and to monitor the frequency of trades.
China Expands Regulatory Framework For Crypto Transactions
The move adds another layer to China’s comprehensive ban on crypto transactions, which has been in place since 2019. Since then, financial institutions have been barred from providing any crypto-related services in the country. Among other concerns, authorities have mentioned energy consumption from mining and its effect on the environment as reasons for the restrictions.
Liu Zhengyao, from ZhiHeng law firm, said the fresh forex rules have given regulators more legal basis to punish crypto trading. He said converting yuan into cryptocurrencies and trading with foreign fiat currencies may constitute a cross-border financial transaction under such regulation.
“It will be increasingly difficult to circumvent China’s forex rules through crypto trading,” Zhengyao said, adding that the country’s anti-crypto stance may continue and worsen.
Second to none, despite its strict policies, China has amassed a Bitcoin treasury of 194,000 BTC, estimated to be worth about $18 billion. These assets have been accrued mainly from asset seizures related to crime, rather than through active buying or trading.
This paradox underlines China’s complex attitude towards crypto assets: though the government banned domestic transactions and policies related to crypto-related activity with unparalleled vigor, it still has huge Bitcoin reserves.
Former Binance chief Changpeng “CZ” Zhao hinted that China would adopt a Bitcoin Reserve Strategy. During a keynote online appearance at the Bitcoin MENA event in the capital of Abu Dhabi last week, Zhao sounded optimistic when he said China might eventually change course on its recently adopted policies.
“If China decides to act, it moves fast,” Zhao said. “The government would have to resort to such measures at some point in time.”
China’s latest moves show its resolve to increase control over crypto-related activities and reaffirm its “draconian” stance on digital assets. However, the country’s large Bitcoin reserves and leading role in crypto mining worldwide create a more complicated relationship with the sector.
While the new regulations promise to curb illegal financial activities, they could also tighten China’s grip on the digital currency space and make it a key player in the developing global crypto landscape.
