As a researcher with years of experience tracking global financial regulations, I find China’s recent move to tighten its grip on crypto assets intriguing yet not surprising. Having closely followed their evolving stance towards digital currencies, it seems that China is taking a “draconian” approach to crypto, much like their Great Wall strategy against invading armies.
The new rules are reminiscent of the cat-and-mouse game between regulators and innovators in any emerging market. The Chinese authorities appear to be making it increasingly difficult for residents to buy digital assets, but as history has shown us, innovation often finds a way around such restrictions.
It’s fascinating that despite China’s anti-crypto stance, they hold the second-largest Bitcoin reserves in the world, worth approximately $18 billion. This is a bit like an elephant hiding its tusks while publicly advocating against ivory trade – ironic, isn’t it?
Finally, I find it amusing that former Binance CEO Changpeng “CZ” Zhao sees China as a potential adopter of a Bitcoin reserve strategy. One can almost imagine the Chinese government saying, “We mine Bitcoin, not potatoes!” It remains to be seen if China will indeed follow through on this strategy, but it’s certainly an interesting twist in the ongoing saga of crypto and global finance.
The Chinese authority overseeing foreign exchange has issued guidelines, instructing domestic banks to keep an eye on and mark transactions that involve digital currencies which might be considered high-risk.
On December 31st, as per a report by South China Morning Post, China is set to enforce stricter regulations that could potentially limit its citizens’ ability to purchase digital assets.
Under the regulations, banks are required to track and document any high-risk foreign exchange transactions they engage in. This encompasses activities like cross-border betting, unofficial banking systems, and illicit cross-border financial dealings involving cryptocurrencies.
Chinese regulators likewise mandate that banks within mainland China monitor transactions according to the identities of the people and entities engaged, the origin of their funds, and the regularity of their trading actions.
China to continue “draconian” anti-crypto stance
Lawyer Liu Zhengyao from ZhiHeng law firm stated that the latest regulations could serve as an additional ground for penalizing cryptocurrency transactions. Liu also indicated that it’s likely that China’s mainland regulators may further strengthen their stance on cryptocurrencies in the future.
Zhengyao mentioned that purchasing cryptocurrency with yuan and then converting it into foreign fiat currencies might fall under the category of cross-border activities involving digital assets under the latest laws. The attorney added that it could be challenging to bypass the nation’s foreign exchange regulations using cryptocurrency due to the new restrictions.
Since 2019, China has forbidden cryptocurrency transactions as part of an effort to decrease energy consumption from mining and lower greenhouse gas emissions. The Chinese government believes that this ban on crypto banking is necessary. Furthermore, financial institutions are strictly prohibited from engaging in any activities related to digital assets or crypto mining within the country.
China holds $18 billion worth of Bitcoin
Although China is known for its negative stance on cryptocurrencies, it ranks as the second country with the most Bitcoins (BTC) held. According to data from Bitbo’s Bitcoin Treasuries tracker, China holds approximately 194,000 BTC, equating to around $18 billion at the time of writing. This places China second in terms of Bitcoin holdings worldwide.
In countries where crypto assets are considered illegal, such as China, official purchases of Bitcoin (BTC) do not occur. Instead, the country’s Bitcoin holdings have been obtained through asset confiscations related to unlawful activities.
As an analyst, I’d rephrase that statement as follows: Despite China’s efforts to curb cryptocurrency use, the former CEO of Binance, Changpeng “CZ” Zhao, predicted that China would eventually adopt a strategy involving Bitcoin reserves. This prediction was made during the Bitcoin MENA event in Abu Dhabi, where Zhao suggested that if China were to make a decision, it could swiftly implement relevant policies. He emphasized that such a move by China is inevitable, stating that they “should do it at some point.
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2025-01-01 12:14