China’s new rules force banks to flag transactions with crypto: report

China’s new rules require banks to flag risky transactions, including those involving crypto, making it harder for mainland investors to trade digital assets.

China’s foreign exchange regulator, the State Administration of Foreign Exchange, has introduced new rules requiring banks to more closely monitor transactions related to digital assets, South China Morning Post has learned, citing the regulator’s announcement.

The rules that apply to local banks in mainland China focus on identifying “risky foreign exchange trading behavior,” the report said. These include underground banking, cross-border transactions involving crypto, and illicit financial activities.

Banks now need to track transactions by checking things like who is involved, where the money comes from, and how often transactions occur. The report also expects Chinese banks to establish risk control measures for these institutions and limit their access to certain services.

The new rules are part of China’s effort to tighten its control over cryptocurrencies, including Bitcoin trading and mining, which authorities see as a risk to financial stability.

China has taken a tough stance on crypto over the years. In 2017, Beijing banned initial coin offerings and closed local crypto exchanges to prevent financial risks. By 2021, things have escalated further with crypto trading and mining being completely banned. Despite these restrictions, it is still technically legal for individuals to own digital assets, although gray areas in regulation complicate matters.