China has implemented stringent new regulations on foreign exchange (forex) to increase oversight of cryptocurrency trades, making it harder for residents to engage in digital asset purchases. The latest rules mandate Chinese banks to identify and report any potentially risky forex transactions, especially those involving cryptocurrencies. Banks are required to monitor cross-border activities involving gambling, underground banking, and other illegal financial exploits tied to crypto assets.
The regulations compel banks to track the identity, funding sources, and frequency of trades linked to individuals and institutions. This marks another step in China’s ongoing restrictive approach toward cryptocurrency activities. Legal experts believe that these regulations will further solidify the basis for punitive measures against crypto trading.
Lawyer Liu Zhengyao from ZhiHeng law firm noted that the new rules could classify yuan-to-crypto transactions, followed by exchanges into foreign currencies, as cross-border activities. These changes make it increasingly challenging to bypass China’s forex regulations through digital currencies.
Despite banning crypto transactions since 2019—ostensibly to cut energy consumption linked to mining and to reduce greenhouse emissions—China remains a significant holder of Bitcoin (BTC). The country is second in global Bitcoin possession, with 194,000 BTC, valued at approximately $18 billion. These holdings stem from asset seizures tied to illegal activities, as China refrains from purchasing Bitcoin due to its stringent anti-crypto stance.
However, former Binance CEO Changpeng “CZ” Zhao speculated that China might eventually adopt a Bitcoin reserve strategy due to its ability to rapidly implement policy changes. He suggested that the country may consider such a strategy at some point in the future.
