David Edwards
Strict regulations have been put in place by the Chinese foreign exchange regulator, mandating that domestic banks keep an eye on and report high-risk cryptocurrency foreign exchange transactions. The action, which was announced by the South China Morning Post on December 31, is part of mainland China’s ongoing crackdown on digital assets.
Risky forex transactions are the focus of new regulations.
The new framework requires banks to keep an eye on and report foreign exchange trading activity connected to transactions involving cryptocurrencies. These consist of illicit financial transactions, underground banking operations, and cross-border gaming.
Chinese banks must follow people and organizations according to their names, funding sources, and trading patterns in order to maintain compliance. Enhancing transparency and reducing illegal financial activity are the goals of this.
According to Liu Zhengyao, a legal expert at ZhiHeng Law Firm, new rules give authorities more justifications to punish transactions involving cryptocurrencies. Zhengyao clarified that it may now be considered cross-border activity to convert yuan into cryptocurrency before exchanging it for foreign fiat currencies, making it more challenging to avoid FX restrictions.
Since prohibiting cryptocurrency transactions in 2019, China has maintained a strict anti-crypto posture, claiming worries about financial stability, environmental damage, and energy usage. It is forbidden for financial organizations to work with digital assets, including mining activities.
Policy Inconsistencies: China’s Bitcoin Holdings
According to Bitbo’s Bitcoin Treasuries tracker, China is the second-largest Bitcoin holder in the world, holding 194,000 BTC valued at almost $18 billion, despite its official ban. However, rather than being the result of deliberate purchasing, these holdings are ascribed to government asset seizures from illegal activity.
China may someday embrace a Bitcoin reserve plan, according to former Binance CEO Changpeng “CZ” Zhao, who emphasized that the nation may quickly enact such rules if it so chooses.
Consequences for the World Crypto Market
China’s stricter laws further distance the country from the worldwide adoption of cryptocurrencies, which could affect international trade patterns and put more pressure on other countries to impose stricter regulations on cryptocurrencies.
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