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China’s State Administration of Foreign Exchange has introduced new rules mandating banks to monitor transactions involving digital assets more closely. These measures, reported by the South China Morning Post, aim to identify and curb risky foreign exchange trading behaviors linked to cryptocurrencies and other financial activities deemed illegal.
The newly implemented rules apply to local banks across mainland China and emphasize tracking foreign exchange activities tied to digital currencies. Banks are now required to assess the parties involved in transactions, scrutinize the origins of funds, and evaluate the frequency of trades. Additionally, they are instructed to develop robust risk-control systems to mitigate potential threats posed by these activities. Banks may also restrict access to certain financial services for entities flagged as high-risk under the updated regulations.
These latest rules are a continuation of China’s long-standing effort to tighten its grip on cryptocurrency activities. Authorities argue that digital assets, including Bitcoin, pose significant risks to financial stability. Over the years, China has adopted one of the most restrictive stances on cryptocurrencies globally.
The country’s crackdown began in 2017 with a ban on initial coin offerings (ICOs) and the closure of domestic crypto exchanges to curb financial risks. By 2021, Beijing escalated its measures by enacting a comprehensive ban on cryptocurrency trading and mining. These steps have effectively outlawed large-scale crypto activities while reinforcing state control over financial markets.
The new regulations place particular emphasis on identifying underground banking and cross-border transactions involving crypto. These activities have been flagged as major concerns by regulators, who see them as conduits for money laundering, tax evasion, and other financial crimes. By compelling banks to enhance their oversight and reporting mechanisms, China aims to clamp down on illicit financial flows that undermine its economic policies and currency controls.
Despite the country’s strict regulatory environment, it remains technically legal for individuals in China to hold digital assets. However, the lack of clear regulations and persistent gray areas create confusion and challenges for crypto holders. While ownership is permitted, any trading, mining, or related activities are strictly prohibited, leaving limited options for individuals to engage with cryptocurrencies.
China’s heightened scrutiny of crypto transactions underscores its commitment to maintaining financial stability and minimizing risks associated with digital assets. By enforcing stringent monitoring requirements on banks, the government seeks to close loopholes and limit the proliferation of crypto-related activities within its borders. These measures also reflect the broader global trend of governments seeking to balance innovation in financial technology with the need for security and regulation.
As China continues to strengthen its regulatory framework, the future of cryptocurrency in the region remains uncertain. The latest rules not only reinforce the country’s tough stance on digital assets but also highlight its determination to exercise greater control over cross-border financial flows and maintain its economic integrity.
editor
A web 3 girl living in a web 2 world.
