China's Ministry of Public Security has released a draft Cybercrime Prevention Law, signaling a significant regulatory shift for the cryptocurrency sector. The draft law, open for public comment as of January 31, 2026, aims to transition from financial risk prevention to precise criminal governance. It targets key areas such as OTC capital flow, technical development, and public chain node operations, potentially increasing compliance costs and operational challenges for crypto businesses. The draft law introduces stringent measures, including redefining "knowledge" in OTC transactions and extending jurisdiction to Chinese citizens and foreign entities involved in cybercrimes. It also mandates blockchain nodes to monitor and block illegal activities, posing challenges for decentralized networks. Legal experts suggest that these provisions could lead to administrative penalties and, in severe cases, criminal liability. This legislative move marks a new phase in China's regulatory approach, emphasizing compliance as essential for the survival of crypto operations.