According to a report in the South China Morning Post, China has introduced new regulations to identify and control high-risk foreign exchange activities, including virtual currencies.
China’s State Administration of Foreign Exchange recently instructed banks to monitor and report suspicious transactions related to cross-border gambling, underground financial networks, and unauthorized cryptocurrency transactions, according to the report.
The new rules require banks to track the identities, sources of funds and transaction patterns of the individuals and entities involved.
Legal experts see these measures as further crackdowns on virtual currency transactions in the country. Liu Zhengyao, a lawyer at ZhiHeng Law Firm, reportedly said that these rules will tighten China’s regulations on cryptocurrencies and strengthen the government’s intention to control the industry.
China’s virtual currency relationship
The latest measures reflect China’s tougher stance on cryptocurrencies, but highlight the government’s nuanced approach to the broader industry.
The Asian country’s government has seen commercial cryptocurrency activities such as Bitcoin trading and mining as a potential threat to financial stability and has taken strict regulatory measures for years.
However, recent developments suggest a growing recognition of the importance of this field.
The People’s Bank of China (PBOC) recognized Hong Kong as a leader in crypto regulation in its 2024 Financial Stability Report. The report also highlighted the importance of developing a robust framework to oversee digital assets and align with global efforts.
Additionally, Chinese courts have previously ruled that owning virtual currencies is legal. Still, they stressed that their use is strictly limited to personal property or goods, and not as a payment method or investment vehicle.
Despite recognizing the industry’s potential, Chinese regulators remain cautious. They warn that the growing adoption of cryptocurrencies in payment systems and private investments could pose risks to the financial system.
