Forex Risks Prompt China to Enforce Stricter Crypto Transaction Rules

China’s State Administration of Foreign Exchange (SAFE) has introduced stringent regulations aimed at bolstering the scrutiny of financial transactions involving cryptocurrencies. These measures are designed to mitigate forex risks and ensure financial stability.

The new rules require banks to identify and report high-risk transactions, including those tied to underground banks, cross-border gambling, and illegal financial activities involving cryptocurrencies.

Stricter Monitoring and Reporting Requirements

The new regulations mandate local banks to closely monitor “risky foreign exchange trading activities,” including those linked to cryptocurrencies.

Banks must assess risks based on factors such as the identity of participants, the source of funds, and trading frequency.

“We cannot allow a few individuals to jeopardize the well-being of our entire community,” stated Liu Zhengyao, a lawyer at ZhiHeng Law Firm in Shanghai, reported Defi-Planet.

Impact on Cryptocurrency Trading

These regulations are expected to create significant hurdles for mainland investors seeking to trade Bitcoin and other digital assets.

The rules provide a stronger legal basis for penalizing crypto-related activities. “It can be foreseen that mainland China’s regulatory attitude towards cryptocurrencies will continue to tighten in the future,” Liu Zhengyao remarked.

Broader Efforts to Curb Financial Risks

The regulatory tightening aligns with China’s broader efforts to curb financial risks. The People’s Bank of China’s China Financial Stability Report 2024 highlights concerns about potential threats to financial stability posed by cryptocurrencies.

“The energy demands of crypto mining are unsustainable and pose a threat to our national grid,” explained Evgeny Grabchak, Russian Deputy Energy Minister1.

Technological Solutions to Combat Illegal Activities

Amidst the crackdown, technological advancements offer hope for curbing illegal mining. AI-powered smart meters, developed by St. Petersburg State University, Lartech, and the Energomera group, are designed to detect illegal consumption patterns, such as crypto mining.

“Innovation is key to addressing the challenges posed by illegal activities,” a spokesperson from Lartech commented1.

China’s decision to tighten regulations on cryptocurrency transactions and target forex risks reflects a broader effort to address the significant risks posed by the industry.

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