China’s new foreign exchange rules require banks to tighten oversight of cryptocurrency trades

China’s foreign exchange regulator has issued new rules requiring banks to report risky trades, including those involving… CryptocurrenciesThis may make it more difficult for mainland investors to buy and sell Bitcoin And other digital assets.

Banks are expected to monitor and report “risky foreign exchange trading behaviors,” including underground banking, cross-border gambling and illegal cross-border financial activities involving cryptocurrencies, according to an announcement last week by the Federal Reserve. State Administration of Foreign Exchange.

The rules applicable to local banks across mainland China also require tracking such activities based on the identity of the institutions and individuals involved, the source of funds and frequency of trading, among other factors.

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In addition, banks must put in place measures to control risks covering those entities and restrict the provision of certain services to them, the regulator said.

The latest rules reflect how Beijing continues to exercise strict regulation to root out commercial cryptocurrency activities, such as bitcoin trading and mining, as the digital asset is seen as a threat to the country’s financial stability.

Chinese regulators remain against activities related to Bitcoin and other cryptocurrencies. Image: Shutterstock alt=Chinese regulators remain against activities related to Bitcoin and other cryptocurrencies. Image: Shutterstock>

“The new rules will provide another legal basis for penalizing cryptocurrency trading,” said Liu Zhengyao, a lawyer at law firm ZhiHeng in China. Shanghaihe wrote in a WeChat post last week. “Mainland China’s regulatory stance towards cryptocurrencies is expected to continue to tighten in the future.”

The practice of using yuan to buy cryptocurrencies before exchanging digital assets for various foreign fiat currencies could be considered “cross-border financial activities involving cryptocurrencies” under the new forex rules, especially if the amount exceeds the legally permissible value, according to Liu. .

Liu said the new rules will make it “increasingly difficult in the future to evade the country’s forex trading regulations through cryptocurrencies.”

Beijing first banned initial coin offerings and ordered the closure of cryptocurrency exchanges in 2017. This crackdown intensified in 2021, when Bitcoin mining was banned and all cryptocurrency-related businesses were declared illegal.

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