China has recently implemented new regulations aimed at identifying and controlling risky foreign exchange activities, including those involving cryptocurrencies, according to a report by the South China Morning Post.
The State Administration of Foreign Exchange in China has instructed banks to closely monitor and report any suspicious transactions related to cross-border gambling, underground financial networks, and unauthorized crypto dealings. The new rules mandate that banks keep track of the identities of individuals and entities involved, the sources of their funds, and their trading patterns.
Legal experts believe that these measures signify a further crackdown on crypto trading within the country. Liu Zhengyao, a lawyer at the ZhiHeng law firm, has stated that these regulations strengthen China’s regulatory measures against cryptocurrencies, demonstrating the government’s determination to regulate the industry.
China’s relationship with cryptocurrencies has been complex. While the country has imposed strict regulations on commercial crypto activities such as Bitcoin trading and mining, citing potential threats to financial stability, recent developments indicate a shift in the government’s approach to the industry.
In its 2024 Financial Stability Report, the People’s Bank of China acknowledged Hong Kong as a leader in crypto regulation and highlighted the importance of establishing robust frameworks for overseeing digital assets in alignment with global standards. Additionally, a Chinese court has ruled that owning cryptocurrencies is legal, albeit with restrictions on their use limited to personal ownership or as commodities, not as payment methods or investment vehicles.
Despite recognizing the potential of the crypto industry, Chinese regulators remain cautious. They caution that the widespread adoption of cryptocurrencies in payment systems and retail investments could pose risks to financial systems.
The evolving regulatory landscape in China reflects the government’s efforts to strike a balance between fostering innovation in the crypto sector and safeguarding financial stability. By implementing these new regulations, China aims to mitigate the risks associated with cryptocurrency activities while acknowledging the growing importance of digital assets in the global economy.