China is taking its crackdown on crypto assets to the next level with its recently implemented stringent foreign exchange regulations.
This makes it even harder for residents to engage in crypto trading. These measures, which took effect on December 31, 2024, target cross-border crypto activities. Despite the crackdown, China still holds billions in Bitcoin (BTC), sparking questions about its real crypto strategy.
China’s New Regulations for a Tighter Grip on Crypto
The fresh regulations require banks to scrutinize crypto traders’ identities, track their funds’ sources, and monitor trading patterns. Liu Zhengyao, a lawyer from ZhiHeng law firm, noted that these regulations create a stronger legal framework.
This framework targets crypto traders who try to bypass China’s strict rules. It aims to crack down on illegal cross-border crypto activities. In practice, converting China’s currency, the yuan, into crypto and using it to buy foreign currencies could now be flagged as cross-border activity.
This makes it increasingly difficult to engage in crypto trading without falling foul of the authorities.
China’s Paradox: Tight Regulations and a Massive Bitcoin Stash
While China has imposed strict measures to restrict crypto trading, it holds a massive 194,000 Bitcoin worth around $18 billion. According to the Bitcoin Treasuries tracker from Bitbo, these holdings come from asset seizures linked to illegal activities.
The fact that China holds such a large amount of Bitcoin raises eyebrows, considering its tough stance on digital assets. Former Binance CEO Changpeng Zhao speculated during the Bitcoin MENA event that China could eventually pivot toward a Bitcoin reserve strategy.
While this is unlikely in the immediate future, it is an intriguing paradox. China is cracking down on crypto while stockpiling one of the world’s most valuable digital assets.
Bitcoin’s Bullish Momentum: A Strong Context for China’s Crypto Stash
Currently, Bitcoin is priced at $92,983.54, continuing its bullish trend in a bearish market. This surge in Bitcoin’s value is no small factor considering China’s vast holdings.
If the country shifted toward using Bitcoin in its financial strategy, it would gain a massive asset. This asset would be worth tens of billions of dollars. This paradox highlights a deeper tension in China’s crypto policy.
On one hand, the government aims to protect its financial system from the risks of uncontrolled crypto trading. On the other hand, it’s quietly positioning itself as a major player in the Bitcoin market by accumulating significant holdings.
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