China’s foreign exchange regulator is tightening laws to further crack down on digital asset transactions as part of its ongoing digital currency purging campaign.
The State Administration of Foreign Exchange (SAFE) has introduced new rules for commercial banks, mandating that they flag any forex trades considered risky, including those related to digital assets. Banks are also required to report transactions linked to cross-border gambling and underground banking, providing details such as the parties involved, the source of funds, trading frequency, and more, according to the South China Morning Post.
China’s Ongoing Crackdown On Cryptocurrency
This is the latest phase of China’s long-standing effort to eliminate digital assets, a campaign that began in 2017 under President Xi Jinping’s administration when exchanges were ordered to shut down. While the crackdown has been periodically revived, its effectiveness has been limited, with Chinese residents continuing to find ways around the bans. The crackdown intensified in 2021 with the ban on Bitcoin mining and the declaration that all crypto-related businesses were illegal.
A recent report revealed that China still accounts for 55% of the global BTC mining pool hash rate. Additionally, the Chinese government reportedly owns 194,000 BTC, valued at $19 billion, second only to the U.S.
Despite the ongoing challenges, Beijing continues to introduce new regulations aimed at suppressing specific aspects of the digital asset sector, including ICOs and mining. The latest measures provide another means for the government to track and combat digital asset activity, according to Liu Zhengyao, a lawyer with Shanghai-based ZhiHeng law firm.
“The new rules will provide another legal basis for punishing cryptocurrency trading. It can be foreseen that mainland China’s regulatory attitude towards cryptocurrencies will continue to tighten in the future,” he wrote on WeChat.
Shanghai Judge Rules On Digital Assets
Despite the government’s strong opposition to digital currencies, a Shanghai judge ruled two months ago that owning digital assets in China is not illegal. However, businesses are prohibited from investing in digital assets or issuing tokens, as it is seen as disrupting the economic and financial order and potentially facilitating illegal and criminal activities.
