Around December 26, the State Administration of Foreign Exchange (SAFE) issued two new regulatory documents: the "Measures for the Administration of Bank Foreign Exchange Risk Transaction Reporting (Trial)" and the "Provisions on Due Diligence Exemption for Bank Foreign Exchange Business (Trial)," which have attracted widespread attention. With the rapid development of the virtual currency market and the increasingly strict regulation of bank foreign exchange business, how will these documents promote compliance transformation in bank foreign exchange operations, and what impacts should traders pay attention to?
The Significance of the Release of Two New Documents: New Regulation Under the Background of Big Data Interconnectivity and Comprehensive Informationization
The release of the "Measures for the Administration of Bank Foreign Exchange Risk Transaction Reporting (Trial)" and the "Provisions on Due Diligence Exemption for Bank Foreign Exchange Business (Trial)" aims to improve the regulatory system for bank foreign exchange operations, enhance market transparency, and maintain order in the foreign exchange market. In an era where big data circulation is increasingly enhanced, these two documents not only help strengthen the monitoring and management of foreign exchange risk transactions but also provide banks with a clearer compliance framework, thereby promoting the healthy and stable development of the financial environment and ensuring a more standardized and orderly foreign exchange market.
In terms of foreign exchange transaction risk prevention and control: With the increasing frequency of cross-border trade and investment activities, violations of foreign exchange regulations are also gradually increasing, such as false trade and illegal cross-border financial activities involving virtual currencies, which seriously disrupt the order of the foreign exchange market. The introduction of the "Measures for the Administration of Bank Foreign Exchange Risk Transaction Reporting (Trial)" requires banks to monitor and report potential foreign exchange risk transaction behaviors, akin to installing a "monitor" for the foreign exchange market, enabling timely detection and curtailment of illegal activities, ensuring the facilitation of cross-border trade and investment, and better coordinating development and security.
In terms of standardizing bank foreign exchange operations: Previously, banks faced issues such as unclear responsibility definitions and ambiguous due diligence standards in foreign exchange operations. The "Provisions on Due Diligence Exemption for Bank Foreign Exchange Business (Trial)" provides clear guidance, clarifying the circumstances and conditions for due diligence exemption, allowing banks to understand how to diligently fulfill their responsibilities in foreign exchange operations while ensuring that they are protected from unreasonable penalties after fulfilling their duties, helping banks accurately grasp the review responsibilities of foreign exchange operations and ensuring the normal conduct of foreign exchange business.
What Seems Like Regulation of Banks, What Impact Does It Have on Cryptocurrency Traders?
1. Under Increasingly Strict Regulatory Measures, the Crackdown on Virtual Currencies
Full Chain Monitoring: The foreign exchange administration's crackdown on virtual currency trading starts with a comprehensive grasp of the entire chain. The full chain refers to the entire process of virtual currency from purchase to trading and then to withdrawal. When the foreign exchange administration can fully understand the flow of funds and the parties involved in the transaction chain, any abnormal or illegal behavior may become a target for crackdown. For example, in cross-border virtual currency transactions, if the sources, destinations, and authenticity of the transactions can be fully tracked and monitored, any attempts to evade foreign exchange management regulations will face higher risks.
Banks Discovering and Reporting Relevant Information: Virtual currency transactions often involve the flow of funds, especially cross-border fund flows. Banks, as intermediaries for fund circulation, bear the responsibility of monitoring large transactions and abnormal behaviors. When banks discover suspicious transactions, especially those related to virtual currency, they are required to promptly report to the foreign exchange administration and provide risk warnings to customers according to relevant regulations. This step is crucial in combating virtual currency trading, as it serves as an important channel for the foreign exchange administration to obtain information.
Foreign Exchange Administration's Criteria for Crackdown: The foreign exchange administration has the authority to decide whether to crack down on certain virtual currency transactions based on its judgment. However, the criteria for such crackdowns have not been fully disclosed and remain somewhat ambiguous. Generally, the foreign exchange administration considers multiple factors, including but not limited to the size of the transaction amount, the legality of the source of funds, and whether the transaction involves illegal purposes (such as capital flight, money laundering, etc.). Although there is a lack of clear standards, under the backdrop of increasingly transparent regulatory information, the foreign exchange administration can more effectively combat violations.
2. Why Did the Foreign Exchange Administration Simultaneously Release Regulatory Documents and Exemption Provisions, What Is the Deeper Logic?
With the advancement of information technology, the foreign exchange administration has strengthened its monitoring capabilities over virtual currencies and other cross-border fund flows. The application of big data technology enables the foreign exchange administration to more accurately identify and monitor suspicious behaviors in virtual currency transactions. This not only improves the efficiency of regulation but also significantly reduces the existence of regulatory blind spots.
However, to avoid excessive impact on bank operations due to regulatory changes, the foreign exchange administration has also specifically issued exemption clauses to ensure that banks can transition smoothly when adjusting regulatory measures, thereby avoiding adverse effects on the stability of the financial market.
3. Nature Definition of Different Transaction Behaviors Under New Regulation
Legal Behaviors:
For ordinary consumers: It is important to reassure everyone that the purchase and trading of virtual currencies, as long as the source of funds is legal, generally will not involve serious legal risks. Additionally, if consumers' transactions comply with the annual foreign exchange facilitation quota, they will also generally not face serious legal risks.
For enterprises or institutions: As long as the source of funds is legal, the cross-border fund flow is genuine, and it complies with relevant foreign exchange management regulations, the foreign exchange administration generally will not intervene.
High-Risk Behaviors:
Involving Criminal Activities: If virtual currency transactions are used for money laundering, terrorist financing, capital flight, or other criminal activities, the foreign exchange administration has the authority to impose penalties according to the law. In this regard, virtual currencies themselves are not illegal; rather, their use and transaction background may turn them into tools for criminal activities.
Illegal Activities Such as Capital Flight and Fraudulent Foreign Exchange Purchases: When virtual currency transactions involve capital flight, fraudulent foreign exchange purchases, or illegal buying and selling of foreign exchange, the foreign exchange administration has sufficient legal basis to take action. For example, hiding the source of funds through virtual currency platforms or illegally purchasing foreign exchange through underground banks will face severe penalties once discovered.
Internal Regulatory Issues in Banks: Banks must promptly identify and report suspicious transactions based on their warning systems when implementing foreign exchange management. The internal management system of the bank, its information reporting mechanism, and its cooperation with regulatory authorities will directly affect the foreign exchange administration's crackdown on virtual currency transactions.
4. Penalty Cases from the Foreign Exchange Administration
Zhang Mouqun, Wu Mourui, and others were involved in illegal operations and fraudulent export tax refunds by issuing false VAT invoices (Source: Supreme People's Procuratorate, State Administration of Foreign Exchange's Notice on Issuing Typical Cases of Punishing Foreign Exchange Violations)
Keywords: Illegal operation, fraudulent export tax refund, issuing false VAT invoices, full chain crackdown
Basic Case Facts: Zhang Mouqun and Zheng Mouhua, through controlling a company, in collaboration with another company, inflated product prices to fraudulently obtain export tax refunds of 36.63 million yuan. The goods were fictitiously exported and treated as waste. Meanwhile, Wu Mourui and Ma Moujian used another company for illegal RMB to USD exchanges, transferring funds across borders, involving amounts exceeding 180 million yuan, with illegal gains of over 180,000 yuan. Additionally, Zhang Mouqun instructed Wang Mou to issue 522 false VAT invoices, amounting to 56.25 million yuan, fraudulently obtaining tax refunds of 3.18 million yuan.
Case Trial: In September 2021, the People's Court of Wujin District, Changzhou City sentenced Zhang Mouqun to 14 years in prison and fined 28 million yuan; Zheng Mouhua received 12 years in prison and a fine of 8 million yuan; Wu Mourui received 5 years and 6 months in prison and a fine of 350,000 yuan; Gong Mousen was sentenced to 11 years in prison for issuing false VAT invoices. In February 2022, the Changzhou Intermediate People's Court rejected the appeal and upheld the original judgment.
The case strongly investigated the flow of funds and the amount of illegal foreign exchange transactions, using bank statements and chat records as evidence to accurately determine the amount of illegal operations. At the same time, it promoted a full chain crackdown on foreign exchange violations, strengthening cross-border fund monitoring to prevent the emergence of black and gray industries.
5. Coordination and Consensus Among Departments
Although the foreign exchange administration has made certain progress in regulating virtual currency transactions, the implementation and execution of related policies still require time due to the coordination of multiple departmental functions. How to reach a consensus among departments, especially regarding regulatory standards and crackdown measures, still needs a gradual process. With the continuous development of financial regulatory technology, the regulation of virtual currency transactions will become stricter and more refined in the future.
6. Summary of Crypto Salad
While virtual currency trading has brought many innovations and conveniences, it also comes with certain legal risks. Supported by information technology construction and big data monitoring, the foreign exchange administration is strengthening its control over virtual currency transactions. For ordinary consumers, as long as they comply with relevant regulations and maintain a legal source of funds, their trading behaviors typically will not face legal risks. However, for enterprises and institutions, especially those involved in cross-border transactions and fund flows, compliance must be particularly noted.
For any illegal activities, the foreign exchange administration will impose penalties according to the law to ensure the stability and order of the financial market. In the future, as consensus gradually forms among all parties, the regulation of virtual currencies will become more transparent and efficient.
Special Statement: This represents the personal views of the author and does not constitute legal advice or opinions on specific matters.
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