TLDR;
- SAFE’s rulings emphasize strict oversight to maintain control over financial activities.
- China sees cryptocurrencies as threats to economic stability, banning transactions since 2021.
- Using yuan for crypto or foreign exchanges may now be illegal.
- Crypto is property under Chinese law only when treated as commodities.
- Tron’s Justin Sun pushes for progressive crypto policies.
- Stricter oversight highlights China’s control over financial activities.
Recently, China has imposed new regulations requiring banks to monitor and report risky crypto transactions. The purpose of these regulations is to reduce the illegal foreign exchange and cryptocurrency transactions that take place. Their organization (SAFE), i.e., the State Administration of Foreign Exchange, presented a notice that specifically instructed the banks to track transactions that included cross-border gambling, underground banking, and all illegal crypto-related activities.
The rules set forth will mandate the banks of China to carefully monitor crypto transactions with a focus on identifying individuals and organizations involved. The banks are also required to track the sources of funds in these transactions as well as observe the trading frequency. All banks in China must comply with these regulations. This highlights how the government of China is putting its attention on stricter oversight of its financial institutions.
This Recent Development Aligns With the Anti-Crypto Stance of the Chinese Government
As discussed in a previous post, China has maintained a rather strict anti-crypto stance for several years now. The government views digital assets such as cryptocurrency as a threat to the financial stability of the country. That’s why they banned cryptocurrency transactions back in 2021. However, loopholes and underground networks have led to limited trading in this sector. This resulted in the government introducing even stricter regulations.
Lawyer Liu Zhengyao from ZhiHeng Law Firm highlighted that these extra measures offer a stronger legal basis for penalizing cryptocurrency trading. He cautioned everyone that using yuan to purchase cryptocurrencies and exchanging them for foreign fiat currencies can now be categorized as illegal cross-border financial activity, particularly if the transactions surpass legal limits.
China’s continued crackdown on cryptocurrency demonstrates the government’s commitment to maintain control over financial activities in its borders. The Chinese government perceives cryptocurrencies as possible threats to the country’s economic stability. Surprisingly, despite the anti-crypto stance it holds, China is still the second-largest Bitcoin government holder. The government has more than 190,000 BTC, acquired from seizures linked with illegal financial activities.
Cryptocurrency Assets Have Some Protection From Chinese Law
Recently, the Chinese court acknowledged that in certain contexts, cryptocurrency assets do possess property-like attributes that the Chinese law protects. The condition is that cryptocurrency assets must be treated as commodities, not currencies or financial tools. This difference grants legal status to crypto holders to some extent, despite the serious ban on cryptocurrency’s use in financial transactions.
There have been some pro-crypto advocates in China who are asking for a more progressive approach on cryptocurrency. One such example is the founder of Tron Blockchain, Justin Sun, who suggested that coming up with a more competitive regulatory framework for Bitcoin can put China in a better strategic position against the USA. This would overall benefit the world’s cryptocurrency industry.
However, the Chinese government is currently still taking a cautious approach in regards to cryptocurrency. This can be exhibited in SAFE’s recent rulings that focus on stricter monitoring of the Chinese financial institutions.
Read more: TRON, Tether, and TRM Labs Self-Policing the Tron Blockchain
