China Cracks Down on Crypto Anonymity, as Hong Kong and South Korea Tighten Rules

China's Ministry of State Security (MSS) has warned that cryptocurrencies are not beyond the law, despite their decentralized and peer-to-peer nature. The MSS claims that the so-called anonymity of crypto transactions is a misconception, as blockchain technology allows transaction records to be preserved and traced throughout the entire transaction process.

The Ministry stated that blockchain records are public and immutable, and that specialized firms can link wallet addresses to real-world users. This means that while digital currencies like crypto can obscure a user's identity by displaying wallet addresses instead of names, the anonymity is limited and does not guarantee complete identity protection.

In related news, Hong Kong's Securities and Futures Commission (SFC) and the Accounting and Financial Reporting Council (AFRC) have signed a new Memorandum of Understanding (MoU) to expand reporting oversight to licensed digital currency firms. The new agreement will cover information sharing, case referrals, and coordinated inspections, and will supersede the 2021 agreement.

South Korea is also considering introducing a formal market-making system for digital currencies, following the price surge of JPYC on Upbit. The Financial Services Commission (FSC) is reviewing the need to introduce systems such as market-making activities to increase the efficiency and stability of the digital asset landscape.