On Dec. 31, 2024, China’s foreign exchange regulator announced new rules aimed at tightening oversight of cryptocurrency activities.

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China’s government has long maintained a strict stance against digital assets. Since 2017, it has banned initial coin offerings (ICOs), shut down cryptocurrency exchanges, and prohibited financial institutions from engaging in crypto activities. The government’s actions escalated in 2021 when Bitcoin mining was banned, and all crypto-related businesses were declared illegal. Despite these restrictions, China remains the second-largest holder of Bitcoin globally, owning about 194,000 BTC, valued at approximately $18 billion. These assets were seized through law enforcement actions related to illicit activities, as China has not officially bought Bitcoin.

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Although some experts have suggested that China could eventually adopt a Bitcoin reserve strategy, there is no indication that the government will ease its regulations. Legal risks for cryptocurrency traders in China are also growing. In August, the Supreme People’s Court ruled that using cryptocurrencies to convert criminal proceeds violates Chinese criminal law. Additionally, the government has increased oversight of stablecoins like Tether, limiting their use in cross-border transactions.

China’s tough approach toward cryptocurrency starkly contrasts global trends, where digital assets are gaining more acceptance. Despite the potential economic opportunities posed by cryptocurrencies, China remains resolute in its policy to maintain strict control over its financial system and limit the influence of crypto in the country. The latest forex regulations are another step in Beijing’s efforts to restrict cryptocurrency use and protect its financial stability.

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