China has tightened FX restrictions to further control cryptocurrency activities. These new regulations force banks to constantly monitor and disclose any transactions involving digital assets, reinforcing the country’s long-standing ban on cryptocurrency trading.
The new laws require banks to track the identities of individuals and organizations, investigate the sources of their funds, and assess the frequency of their transactions. This strategy seeks to prohibit cross-border financial activity like underground banking, gambling, and cryptocurrency trading.
The laws, which come into effect on December 31, strengthen China’s existing ban on cryptocurrency transactions, which has been in place since 2019. Authorities have cited concerns about energy consumption, environmental implications, and financial dangers as primary reasons for their anti-crypto position.
Legal experts believe that these guidelines give a firmer foundation for prosecuting cryptocurrency-related activities. For example, converting yuan into cryptocurrency and then exchanging it for foreign fiat currencies may now be considered a cross-border transaction. This makes it increasingly harder for individuals to circumvent forex laws by utilizing digital assets.
Despite its stringent limitations, China owns a considerable amount of Bitcoin. With around 194,000 BTC worth an estimated $18 billion, these holdings were obtained through asset seizures linked to unlawful activity, rather than active involvement in the crypto market.
Former Binance CEO Changpeng Zhao has stated that China may eventually adopt a Bitcoin reserve plan, showcasing the country’s ability to pivot fast if its policies alter. For the time being, the government remains staunchly opposed to cryptocurrency.
China’s latest legislation demonstrates the country’s commitment to monitoring digital asset activity, cementing its image for stringent oversight. While these regulations may assist in reducing illegal activity, they also position China as a sophisticated player in the expanding global cryptocurrency scene.
