China rolls out new rules with tightened scrutiny on crypto transactions

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China has released new rules for its foreign exchange that includes stricter scrutiny of crypto transactions.

According to a report by local media on 31 December, The State Administration of Foreign Exchange has instructed banks to monitor and flag what it calls risky investments, which include cryptocurrency transactions.

The regulator also expects banks to track information such as the identity of the institutions and individuals involved, source of funds and trading frequency, among others.

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Making Bitcoin investment difficult

The new rules are applicable to banks within mainland China, and are with immediate effect. 

In addition to reporting the transactions, the banks have also been directed to stop providing services to individuals or businesses involved with crypto.

This is coming at a time when rumours have been making the rounds that China was getting ready to lift the ban on cryptocurrencies.

The government had placed a ban on Bitcoin and Bitcoin mining in 2017, making it illegal to buy or trade Bitcoin. 

This made stablecoins like USDT to become popular since investors had to first buy stablecoins to buy Bitcoin rather than buy directly with Yuan.

Last year, the Supreme People’s Procuratorate and forex regulator also made this more difficult by calling for stronger supervision of forex trading involving the use of stablecoins as intermediary to trade Yuan.

According to a lawyer at ZhiHeng law firm in Shanghai who commented on the new rules, it will be “increasingly difficult in the future to evade the country’s forex regulations through crypto.” 

How Bitcoin is affected

This new regulatory requirement for banks on mainland China may significantly affect the popularity of Bitcoin among investors.

It may also have contributed to Bitcoin’s inability to recover from the correction that brought it close to $90,000 support.

Interestingly, China has one of the largest number of crypto users on Binance, and this news can have a devastating effect in the long-term.