Intensifying its grip on crypto activities yet again, China introduced new foreign exchange rules that impose stricter scrutiny on crypto transactions.
According to a report from the South China Morning Post on 31 Decmeber 2024, banks are expected to monitor and report “risky foreign exchange trading behaviours.” This includes underground banks, cross-border gambling and illegal cross-border financial activities involving cryptocurrencies.
The announcement was made by the State Administration of Foreign Exchange.
New Rules Could Be Another Legal Basis For Punishing Crypto Trading
Banks have been mandated to track transactions based on the identity of individuals and institutions involved, the source of funds, and trading frequency. Moreover, they must implement risk-control measures to restrict services for entities flagged as engaging in such activities.
“The new rules will provide another legal basis for punishing cryptocurrency trading,” Liu Zhengyao, a lawyer at ZhiHeng law firm in Shanghai, wrote in a WeChat post last week.
Liu noted that these measures signal a deepening of China’s already stringent regulatory stance toward cryptocurrencies, making it increasingly difficult for individuals and businesses to circumvent the country’s foreign exchange laws through digital assets.
China And Crypto: A History Of Crackdowns
China’s relationship with cryptocurrency has been marked by a series of escalating restrictions over the years.
In 2017, China banned initial coin offerings (ICOs) and ordered the closure of all domestic cryptocurrency exchanges. This forced major players like Binance, Huobi, and OKX to relocate their operations abroad.
The government extended its crackdown to Bitcoin mining in 2021. The authorities cited environmental concerns and financial risks. Furthermore, mining hubs in regions like Sichuan and Xinjiang were shut down, causing a significant drop in global Bitcoin hashrate at the time.
Financial institutions were barred from offering crypto-related services, and overseas platforms serving Chinese residents were declared illegal.
Explore: Shanghai Court Overturns China Bitcoin Ban: Will Chinese Energy Grid Cope?
Despite these measures, China remains a significant player in the crypto space. The government reportedly holds approximately 194,000 Bitcoins (worth around $18 billion), acquired through raids on illegal operations.
In fact, ex-Binance CEO Changpeng Zhao said that China will be joining other countries in implementing a Bitcoin Reserve Policy.
Owning Crypto Isn’t Illegal Under Chinese Law
China is on the verge of allowing crypto again!
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— 𝗰𝘆𝗰𝗹𝗼𝗽 (@nobrainflip) June 6, 2024
A Shanghai court dropped a surprise verdict in November 2024, declaring that owning cryptocurrency isn’t illegal under Chinese law. This finally gave crypto holders some legal peace of mind.
Sun Jie, a Shanghai Songjiang People’s Court judge, broke it down in a statement on the Shanghai High People’s Court’s WeChat account. The takeaway? Citizens can legally hold crypto as personal property, but businesses can’t invest in or issue tokens without strict oversight.
The statement emerged from a case involving a spat over an initial coin offering—labeled as illicit financing under China’s hardline policies.
Beijing still views crypto as a financial grenade, banning related business activity outright to avoid economic chaos. While crypto might carry property rights for individuals, using it commercially or as payment for shady dealings remains off-limits.
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