China is set to enact new forex laws pertaining to the crypto sector. According to a December 31st report by South China Morning Post, China’s foreign exchange regulators are implementing a new regulation requiring banks to flag risky operations and trades, including those involving cryptocurrency.
The rule will likely make it more challenging for mainland investors to purchase and sell Bitcoin and other digital assets, if implemented.
China’s New Forex Rules: What Do They Say?
According to the State Administration of Foreign Exchange’s notice last week, banks are expected to keep an eye out for and report “risky foreign exchange trading behaviors,” such as underground banks, cross-border gaming, and illicit cross-border financial operations involving cryptocurrencies.
The regulations, which apply to local banks in mainland China, also mandate that they monitor these kinds of transactions based on a number of variables, including the identities of the institutions and persons engaged, the source of funds, and the frequency of trade.
The rules will likely make it difficult to trade cryptocurrencies for traders in mainland China. The rules also highlight the slight hesitation that the Chinese government has regarding the full function of crypto in the nation.
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China’s Aversion To Crypto Sector
China, a nation which once was a hub of crypto transactions in the world, has now taken a rather strict watch towards its crypto sector.
Because its government thinks cryptocurrencies could cause currency instability at a time when it is trying to grow its economy, China has a strong anti-crypto policy.
It is taking part in attempts to build cryptocurrency regulations and has considered establishing its own CBDC. However, these methods have been rather slow, making it disappointing for many investors.
The People’s Bank of China (PBOC) outlawed cryptocurrency transactions in late September 2021. The PBOC had mentioned how cryptocurrencies facilitate financial fraud and how their highly speculative nature makes them a significant threat to China’s financial system.
However, the situation on the ease towards the market has seen a slight shift, given that China also wants to stay in tandem with the global curve. Previously, despite strict prohibitions on cryptocurrency-related corporate activity, the Shanghai Songjiang People’s Court made it clear that individuals in China are legally allowed to acquire cryptocurrencies.
Chinese Crypto Investors Flock Towards Hong Kong
Chinese crypto investors have been trying to flock towards Hong Kong crypto markets, given the ease of trading in the region. Contrary to mainland rules, Hong Kong has been trying to become a hub of crypto sector in Asia.
Previously, legislators in Hong Kong had suggested making Bitcoin a budgetary reserve. The formal announcement states that the region has proposed incorporating Bitcoin into the city’s budgetary reserves and investigating the possibility of purchasing and holding it for a long time using the Exchange Fund.
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