YEREVAN (CoinChapter.com) — China’s updated foreign exchange (forex) regulations are aimed at restricting crypto trading and associated activities. According to the South China Morning Post on December 31, these regulations mandate Chinese banks to identify the individuals and institutions involved in crypto transactions. They must also monitor the sources of funds and the frequency of trading to detect any risky activities.
The regulations also target cross-border financial transactions, including underground banking, gambling, and illegal crypto-related activities. These measures are intended to strengthen China’s control over its foreign exchange system.
Stricter Penalties for Crypto Trading
Liu Zhengyao, a lawyer at the ZhiHeng law firm, emphasized that the new forex regulations provide additional grounds for penalizing crypto transactions. The use of the yuan to purchase crypto and convert it into foreign fiat currencies is now considered a cross-border financial activity. He explained that under the updated regulations, circumventing restrictions through crypto will become significantly more challenging.
China’s strict approach to cryptocurrencies began in 2019 when the government banned crypto transactions. The main reasons cited by officials were the energy consumption associated with crypto mining and environmental concerns. Financial institutions were also prohibited from engaging in digital assets or mining activities.
China Holds $18 Billion in Bitcoin
Despite its firm stance against cryptocurrencies, China ranks as the second-largest holder of Bitcoin globally. The country owns 194,000 BTC, valued at approximately $18 billion, according to data from BitcoinTreasuries.NET by Bitbo. These holdings were acquired through the seizure of assets tied to illicit activities, rather than through market purchases.
China’s significant Bitcoin reserves reflect its ongoing efforts to combat illegal crypto use. These seizures contribute to its position as a major holder of digital assets, even as the government maintains its prohibition on crypto transactions.
Increased Scrutiny Reflects Anti-Crypto Policies
The latest forex regulations highlight China’s continued efforts to restrict the use of cryptocurrencies within its borders. Banks are required to implement stricter controls on cross-border transactions and report any suspicious activities. This aligns with the country’s broader strategy of limiting crypto activities and enforcing compliance with foreign exchange laws.
China’s regulatory measures, combined with its substantial Bitcoin holdings, illustrate the government’s dual approach to cryptocurrencies. While crypto assets remain illegal for residents, enforcement actions have allowed authorities to accumulate significant reserves.
