China Tightens Cryptocurrency Oversight with New Forex Rules

China’s State Administration of Foreign Exchange (SAFE) has introduced new regulations aimed at strengthening the scrutiny of risky financial activities, including those involving cryptocurrencies. These rules are designed to increase monitoring and reporting by banks, making it harder for mainland investors to engage in buying or selling bitcoin and other digital assets.

Banks to Monitor Risky Activities Linked to Cryptocurrencies

The regulations require banks to identify and report “risky foreign exchange trading behaviors.” This includes activities linked to underground banking, cross-border gambling, and unauthorized cross-border financial transactions involving cryptocurrencies. The announcement, made last week, underscores the government’s commitment to clamping down on such practices.

Local banks across mainland China are now obligated to assess these activities using various criteria. These include identifying the individuals and institutions involved, examining the sources of funds, and evaluating the frequency of transactions. In addition to monitoring, the banks must implement risk-control measures to restrict services to entities engaged in these activities, as stipulated by the State Administration of Foreign Exchange (SAFE) .

The new rules further solidify Beijing’s stringent approach to regulating commercial cryptocurrency activities . Cryptocurrency trading and mining have long been viewed by Chinese authorities as threats to the country’s financial stability, prompting a series of restrictive measures in recent years.

According to Liu Zhengyao, a lawyer at ZhiHeng law firm in Shanghai, the new regulations will serve as an additional legal foundation for penalizing cryptocurrency-related transactions. In a WeChat post, Liu remarked that China’s regulatory stance on cryptocurrencies is likely to continue tightening in the future.

These developments highlight the ongoing effort by Chinese regulators to maintain control over financial activities and mitigate risks associated with digital assets .

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