China Tightens Control Over Crypto with New Forex Regulations

China tightens crypto regulations, making it harder for investors to trade digital assets like Bitcoin amid ongoing financial controls.

China’s foreign exchange regulator has announced new rules targeting risky financial activities. The rules would make it harder for mainland investors to trade crypto such as Bitcoin. Last week, the State Administration of Foreign Exchange (SAFE) revealed the new regulations.

Banks now have to watch and report risky foreign exchange activities under the new guidelines. This encompasses underground banking, cross border gambling and illegal activities involving cryptocurrencies. Furthermore, banks are also required to monitor all these obtained activities based on the identities of these parties, source of funds and the frequency of these transactions.

Banks are also obliged to take risk control measures. To do so, they must restrict services to risky activity entities. The Chinese strategy to tighten control of cryptocurrency trade and the country’s financial system is part of the broader design.

The move is in line with China’s sustained campaign against digital currencies. Bitcoins have been banned in China, and all Bitcoin operations have been illegal since 2021. Since their inception, cryptocurrencies have effectively been prohibited in that country. In addition, the government continuously enhanced its regulations to eradicate the influence of digital assets.

China Continues Ban on Crypto Mining and Trading Remains Firm

China started controlling cryptocurrencies in 2017. During that time, ICOs were banned and the government ordered cryptocurrency exchanges to shut down. In 2021 once authorities banned bitcoin mining, the crackdown intensified. This is how China has pretty much entirely put an end to any legal cryptocurrency activity in its borders.

While the interest in cryptocurrencies worldwide is growing, China remains unmoved. But some of the recent rally in bitcoin prices have also led to calls for a policy change away from the government’s capitulation to digital currencies.

Using cryptocurrency for criminal activities is against the law, China’s Supreme People’s Court ruled in August 2023. This is adding to the legal risks for cryptocurrency traders in China. In addition, the Supreme People’s Procuratorate and SAFE (State Administration of Foreign Exchange) have both issued requests for further supervision on overseas exchange activities. Stablecoins like Tether fall into this, with stricter oversight required.

However, with China enforcing such regulations, it is unknown whether such will affect the local and international cryptocurrency markets.