As part of its anti-crypto stance, China has recently enhanced its foreign exchange regulations, requiring its banks to diligently track and flag potential high-risk trades involving digital assets. According to a report from South China Morning Post, these regulations will make purchasing cryptocurrencies more difficult for residents.
These latest regulatory standards stipulate that banks should actively monitor and report any suspicious foreign exchange activities, specifically those encompassing cross-border betting, unofficial banks, and illegal international financial transactions involving cryptocurrencies. To execute their duties effectively under these provisions, banks are also mandated to follow crypto activities, noting the personal and institutional identities involved, their funding sources, and the regularity of their trades.
Attorney Liu Zhengyao stated that the introduction of these regulations will further discourage crypto trading as China continues to maintain its stringent position towards digital assets. The revised rules now mean the purchase of crypto with the yuan, before switching it for foreign fiat currencies, could be viewed as a cross-border undertaking. Circumventing China’s foreign exchange laws through cryptocurrencies will thus become increasingly challenging.
In 2019 China enforced a ban on crypto transactions as part of an attempt to decrease the country’s energy consumptions related to mining and mitigate their carbon emissions. Financial establishments were also banned from getting involved with crypto mining and digital assets.
However, despite an aggressive stance against cryptocurrencies, China still holds the second-largest Bitcoin holdings per country portfolio. Based on the data obtained from Bitbo’s Bitcoin Treasuries tracker, Chinese Bitcoin holdings approximate 194,000 BTC, around $18 billion. Since trading digital assets is illegal, these holdings came primarily from seizures linked to unlawful activities.
Former CEO of Binance, Changpeng “CZ” Zhao, forecasts that China could potentially be one of the first countries to adopt a Bitcoin reserve strategy. In his speech at the Bitcoin MENA event in Abu Dhabi, Zhao remained optimistic about China’s ability to quickly adjust policies, emphasizing that eventually, “it must happen.”