The State Administration of Foreign Exchange Issues New Regulations Affecting Forex Trading Deeply

Recently, the State Administration of Foreign Exchange issued the "Measures for the Administration of Bank Foreign Exchange Risk Trading Reports (Trial)", which raises higher requirements for the regulation of bank foreign exchange business, and may also have a significant impact on foreign exchange traders. As the global financial environment becomes increasingly complex and the risks of cross-border capital flows intensify, bank foreign exchange risk management has become a regulatory focus. This article will delve into the core content of this new regulation and its potential implications.

Main Responsibilities of Banks

The new regulations require banks to assume more responsibilities in the following areas:

1. Risk Trading Monitoring and Reporting: Banks need to establish comprehensive monitoring standards to promptly identify and report on risk transactions involving false trade, illegal cross-border financial activities, etc. Reports should be completed within 5 working days after confirming the information.

2. Cooperation with regulatory inspections: Banks must truthfully and promptly provide relevant information to the forex bureau and must not engage in any concealment or obstruction.

3. Improve internal management: Establish corresponding internal systems, standardize reporting processes, and strengthen the management of branches. At the same time, establish and improve the information monitoring system to achieve internal information sharing.

4. Confidentiality: The bank must strictly keep confidential the information obtained during execution and must not disclose or illegally provide it to others.

5. Violation Responsibility: If regulations are violated, the bank will face corresponding penalties. However, if it can be proven that due diligence has been exercised, related responsibilities may be exempted.

Standards for Banks to Assess Risk in Trading

When assessing whether there are risks in cross-border fund transfers, banks mainly consider the following factors:

1. Transaction amount: Is it in line with the client's economic strength or normal business scale.

2. Trading frequency: Are there any abnormal changes or deviations from the normal business range.

3. Fund flow: Is it consistent with the purpose declared by the client, or does it flow to high-risk areas?

4. Industry Characteristics: Combine your own business features and regulatory information to pay attention to abnormal fund transfers of specific industry clients.

Risk Identification in Virtual Currency Trading

Cryptocurrency trading is considered high-risk trading. The main reasons include:

1. Lack of regulation: Virtual currency trading lacks effective oversight.

2. Price Volatility: The prices of virtual currencies fluctuate significantly, increasing risk.

3. Anonymity: Transactions have a strong degree of anonymity, making them easy to be used for illegal fund transfers.

Financial institutions generally remain highly vigilant towards virtual currency trading and implement strict control measures.

Criteria for Identifying Abnormal Transactions

When banks assess whether a transaction is abnormal, they will focus on:

1. Is the transaction amount beyond the daily income and expenditure range of the account.

2. Has the trading frequency increased dramatically in the short term.

3. Is the flow of funds clear and related to normal business activities of the account?

4. Features such as high-frequency trading and complex capital paths in virtual currency trading.

5. Are the sources and uses of funds matched.

6. Are there complete transaction vouchers?

Measures Taken by Banks to Handle Risk Transactions

When a bank identifies that a transaction carries risks, it may take the following measures:

1. Raise the forex compliance risk level of trading entities.

2. Strengthen the review measures for subsequent forex transactions.

3. Raise the approval level for related business.

4. Restrict or refuse to process new forex transactions.

5. Restrict non-face-to-face forex transactions.

6. In extreme cases, accounts may be frozen or fund transfers may be restricted.

To avoid being subjected to the above measures, traders should ensure that their transactions are legal and compliant, providing a clear explanation of the transaction background and relevant evidence. Actively cooperating with bank investigations can also help reduce risks.

Account Freezing and Recovery

Although this method does not specify the specific duration and impact of account freezing, in general, if an account is frozen due to forex risk trading, it is recommended to take the following measures:

1. Proactively explain the transaction background and purpose to the bank.

2. Provide legal and compliant transaction vouchers and related materials.

3. Actively cooperate with the bank's investigation.

The account may only return to normal status after the bank confirms that there are no risks associated with the transaction.

Impact on Participants in Virtual Currency Trading

In the context of strengthened regulation in the banking sector, participants in virtual currency trading may face the following challenges:

1. Restricted capital flow: Banks may restrict or freeze accounts involved in large or high-risk cross-border transactions.

2. Increased transaction costs: Banks may charge additional fees for virtual currency transactions or require more compliance materials.

3. Increased compliance pressure: Platforms need to invest more resources in compliance audits and risk control, especially in cross-border transactions.

4. Reduced operational efficiency: The increase in compliance requirements may affect the overall operational efficiency of the platform.

5. Decline in user experience: Account restrictions and additional reviews may affect the trading experience for users.

Overall, the implementation of the new regulations will have a significant impact on the capital flow, transaction costs, and compliance requirements for participants in virtual currency trading, especially for smaller platforms, where the compliance burden may be heavier.