YEREVAN (CoinChapter.com) — China’s updated foreign exchange (forex) regulations aim to curb crypto trading and related activities. According to the South China Morning Post on Dec. 31, these rules require Chinese banks to identify individuals and institutions involved in crypto transactions. They must monitor fund sources and trading frequency to detect risky activities.
The rules also target cross-border financial transactions, including underground banking, gambling, and illegal crypto-related activities. These measures are designed to strengthen China’s control over its foreign exchange system.
Enhanced Penalties for Crypto Trading
Liu Zhengyao, a lawyer at ZhiHeng law firm, highlighted that the new forex rules provide additional grounds for penalizing crypto transactions. Using yuan to purchase crypto and converting it into foreign fiat currencies now falls under cross-border financial activity. He explained that under the updated rules, circumventing restrictions through crypto will become significantly more difficult.
China’s strict approach to cryptocurrency began in 2019, when the government banned crypto transactions. Officials cited energy consumption from crypto mining and environmental concerns as the main reasons. Financial institutions were also prohibited from engaging with 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, not through market purchases.
China’s large Bitcoin reserves reflect its ongoing enforcement actions against illegal crypto use. These seizures contribute to its position as a significant holder of digital assets, even as the government maintains its prohibition on crypto transactions.
Increased Scrutiny Reflects Anti-Crypto Policies
The latest forex regulations emphasize China’s continued efforts to limit cryptocurrency use 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 restricting crypto activities and enforcing compliance with foreign exchange laws.
China’s regulatory measures, coupled 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.
