However, in 2020, the Beijing Arbitration Commission (BAC) released a report clarifying China`s view on cryptocurrency. The IBC pointed out that although China bans token funding and platforms for exchanging virtual currencies/tokens exchanged for legal tender, it recognizes cryptocurrency as a virtual commodity. The IBC report read: Yes, you read that right, owning Bitcoin (or any other cryptocurrency) is still legal and legally protected in China. China`s ban essentially reflects global concerns about cryptocurrency. Governments in the United States and Asia have expressed concern that digital currencies increase risk, encourage crime, harm investors, and interfere with government control of monetary systems. Most of the investment decisions entrusted do not invalidate the mandate contract, but emphasize that the matter entrusted itself should be borne by the principal for the part of the entrusted case that the trustee has already concluded in accordance with the agreement between the two parties, since the matter entrusted is not protected by law. ; For the trustee`s unfinished portion, the trustee returns the principal funds. Since 2015, the price of Litecoin has risen by about 1,800%, as the cryptocurrency was trading at around $3 seven years ago, according to data from CoinGecko. This ban is part of a nationwide crackdown on the form of currency. The Chinese government considers it a volatile investment and fears it could be used for money laundering. The People`s Bank of China said that “[cryptocurrency] seriously threatens the security of people`s assets.” In June 2019, cryptocurrency trading was officially banned in China when the PBOC stated that it would block access to all forms of cryptocurrency exchanges, domestic and foreign, and initial coin offering websites, although cryptocurrency transactions continue via foreign online exchanges.
The Chinese government has also reported that trade in virtual currencies has contributed to the increase in gambling, fraud, money laundering, pyramid schemes and other illegal activities. Therefore, banning cryptocurrency is necessary to maintain social stability and national security. Meanwhile, the crackdown on cryptocurrency mining has already had an effect. China reported in September 2019 to consume 75% of the world`s Bitcoin energy consumption. By April 2021, this share had fallen to 46%. BSN will also allow users to buy NFTs using only the Chinese yuan instead of cryptocurrencies commonly used to trade NFTs outside of China. Despite enforcing a major cryptocurrency ban a year ago, the Chinese government is still protecting local crypto investors because crypto is recognized as legally protected virtual property. In civil and business processes, it is necessary, on the one hand, to take into account the relevant supervisory regulations and to help regulators carry out their regulatory tasks in an efficient and lawful manner, but it is also necessary to strictly distinguish the different functional positioning of civil and commercial processes and administrative oversight. Administrative oversight is the use of government to carry out micro-interventions and the control of the market economy to correct market failures and the administrative power exercised by the government. On the other hand, civil and commercial disputes deal with the civil contractual relationship between the same subjects and focus on contractual freedom. Respect the autonomy of the will of the parties and, as long as there are no clear violations of national mandatory rules, public interests and public order and morality, freedom of contract should be guaranteed as far as possible for both parties.
This means that cryptocurrencies have never really had the chance to be legalized in China. But it also means that there is no reason for the government to ban them completely. On the contrary, the authorities have opted for repeated repression in order to keep the mass of the population away from these undesirable activities. At the same time, they allow certain people to play the game as long as they are not involved in fraudulent activities or money laundering. China Briefing is written and produced by Dezan Shira & Associates. The practice supports foreign investors in China and has done so since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen and Hong Kong. Please contact the company for assistance in China at china@dezshira.com. On September 24, 2021, 10 government agencies, including the People`s Bank of China (PBOC), jointly issued a notice to clarify that the cryptocurrency is not legal tender.
In addition, all cryptocurrency transactions in China are considered illegal, including offshore exchanges to provide services to Chinese citizens. Authorities have said China-based employees of offshore crypto exchanges or companies that provide services to them will be investigated and prosecuted. In response, several cryptocurrency companies have announced that they will stop providing services to people in China and block Chinese IP addresses. The announcement also affects all Chinese citizens working for cryptocurrency companies overseas, as their roles are now illegal and can be prosecuted. The world`s largest crypto company, Binance, has been blocked in China since 2017. Crypto exchange companies originating from China, such as OKEz and Huobi, are likely to be the hardest hit as they still have a few users in China. Huobi Global, a China-based cryptocurrency exchange, has said it will gradually close accounts in mainland China by December 31, 2021. Experts believe that major Ethereum miners, Bitcoin miners and China-based exchanges are being moved overseas to circumvent regulations. However, creating wealth for its citizens is certainly not the main reason why China has long tolerated (half) cryptocurrencies. The government`s main goal has always been to maintain control while remaining open to promising new technologies.
Kai von Carnap, an analyst at Europe`s largest Chinese think tank, explains: “The government is happy to receive all the `free` expertise in areas related to cryptocurrency and blockchain while employing its large number of engineers. In fact, someone programming on Ethereum today might as well switch to government initiatives like China`s BSN (Blockchain Service Network) or write smart contracts for e-CNY. Due to previous bans already in place in China, many investors and companies expected the recent ban on all cryptocurrencies and related services and operations. Although initial declines in stock prices and the value of virtual currencies were observed, they have since recovered. Due to the introduction of virtual currencies by businesses internationally, it is expected that currencies such as Bitcoin will continue to grow steadily. The struggle for monetary hegemony is better characterized as an insurgency than a Cold War, and China may be willing to use geopolitical tactics to thwart the current hegemony. There are three ways China could use its geopolitical influence to achieve the internationalization of the RMB through the digital yuan. It is not immediately clear what impact large crypto companies will have in the future. Data from cryptocurrency exchange Bitstamp showed that there was an increase in volume on Bitcoin at the time of the announcement, but soon the volume decreased and prices recovered. The Chinese government banned initial coin offerings (ICOs) in 2017 and ordered the closure of exchanges.
Notably, the world`s largest cryptocurrency exchange, Binance, was founded in China, although it was forced to move outside of China after the 2017 bans.