China has rolled out new regulations to identify and control risky foreign exchange activities, including those involving cryptocurrencies, the South China Morning Post reported.

According to the report, China’s State Administration of Foreign Exchange recently directed banks to monitor and report suspicious transactions tied to cross-border gambling, underground financial networks, and unauthorized crypto dealings.

The new rules require banks to track the identity of individuals and entities involved, their sources of funds, and trading patterns.

Legal experts see these measures as a further clampdown on crypto trading within the country. Liu Zhengyao, a lawyer at the ZhiHeng law firm, reportedly remarked that these rules deepen China’s regulatory arsenal against crypto, reinforcing the government’s intention to control the industry.

China’s crypto relationship

While the latest measures reflect China’s strict stance on crypto, they highlight the government’s nuanced approach to the broader industry.

Over the years, the Asian country’s government has enacted strict regulatory measures on commercial crypto activities, like Bitcoin trading and mining, because it views them as potential threats to financial stability.

However, recent developments suggest a growing recognition of the sector’s significance.

In its 2024 Financial Stability Report, the People’s Bank of China (PBOC) recognized Hong Kong as a leader in crypto regulation. The report also emphasized the importance of developing robust frameworks for overseeing digital assets and aligning them with global efforts.

Additionally, a Chinese court previously ruled that owning cryptocurrencies is legal. Still, it emphasized their use is strictly limited to personal ownership or commodities—not as a payment method or investment vehicle.

Despite recognizing the industry’s potential, Chinese regulators remain cautious. They warn that expanding crypto adoption in payment systems and retail investments could pose risks to financial systems.

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