Despite countless Western media accounts of China’s crypto “ban,” crypto trading is very active in mainland China. In just one month last year, Binance reportedly 90 billion dollars China has become the largest market for the world’s largest exchanges in crypto trading.
How is this possible? It’s tempting to turn this into a story about the power of decentralized money to escape government control, but there’s certainly some truth to it. But that’s only part of the story. Cryptocurrencies are not completely banned in China, so they are not going away.
This is very different from the impression we get from Western media, which generally refers to China’s ban on cryptocurrencies and bans on crypto trading. There are too many examples to list here. Do a basic search for these terms to understand what I mean. However, when I asked several Chinese industry insiders if they thought it was true that cryptocurrencies were banned in China, the answer was a resounding no. Their general understanding was that while it is not illegal for individuals to hold or trade cryptocurrencies, their activities are not protected by law.
This interpretation is not limited to informal conversations.Article written by Fujian Court Author Note “Administrative laws and policies do not completely prohibit virtual currency transactions,” a Chinese law firm announced. detailed post Regarding the theme, “Currently, there are no laws or administrative regulations prohibiting Bitcoin trading activities in our country.”
It’s not hard to see why many think that cryptocurrencies are completely banned in China. Chinese authorities have clearly cracked down on the cryptocurrency industry, and there are many crypto-related activities that are not actually allowed.
However, in China, do not have is often said, but it takes on special significance. People tend to pay attention to things that aren’t explicitly restricted. And find room to act in relatively empty spaces.
So let’s take a look at some of the more well-known crypto crackdowns and what they actually said. 2013, China limited Financial institutions and payment institutions’ involvement in Bitcoin. Famous in China in 2017 Initial coin offerings (ICOs) are prohibited. China has also made it clear that crypto exchanges are no longer welcome to operate openly in China. Before the 2017 crackdown, China dominant player In the amount of Bitcoin. This crackdown did not eradicate crypto trading on the mainland, but it certainly pushed it into a gray area. BTCC, China’s longest-running Bitcoin exchange, closed its trading operations in mainland China in 2017.
moreover large scale crackdown The document, signed by 10 Chinese public institutions, sets out a wide range of restrictions. Virtual currencies do not have the same legal status as fiat currencies. In other words, Bitcoin is not legal tender. It states that virtual currency-related business activities constitute illegal financial activities. Exchanges should not act as central trading partners for buying and selling virtual currencies, and it is illegal for overseas virtual currency exchanges to provide services to Chinese residents over the internet. There are other restrictive languages as well.
In 2021, China too strictly controlled Regarding domestic virtual currency mining. But among all these limitations, there are notable gaps. For example, the 2021 regulations do not appear to restrict people from holding cryptocurrencies. It also does not seem to restrict peer-to-peer transactions between individuals.
Another important passage in the 2021 document will likely shed further light on China’s official stance on cryptocurrencies. This article describes the legal risks involved when participating in virtual currency investment and trading activities. If investing in virtual currencies violates public order and morals, related civil lawsuits will be invalidated, and the resulting losses will be borne by individuals.
In other words, if you lose your savings to meme coins, don’t cry to the government about it. Although individual cryptocurrency activities are not necessarily protected by law, that is not the same as being prohibited.
The above sentence may look like hair is splitting. Some may argue that Chinese regulations make it extremely difficult to trade cryptocurrencies. effective Ban. But to understand the real situation, we need to look not just at the rules themselves, but also at how they are being enforced, or not enforced.
China’s crackdown on virtual currency is a well-known fact. It didn’t stop Cryptocurrency trading.Chinese traders got the net. $86 billion According to Chainalysis, this is due to cryptocurrency activity from July 2022 to June 2023. In some cases, they continued to use accounts opened at overseas exchanges. Sometimes you needed a virtual private network, and sometimes you didn’t. Peer-to-peer trading via social media apps such as WeChat and Telegram is also now possible. There are stories of people setting up companies overseas through intermediaries and using those overseas companies to complete systematic Know Your Customer (KYC) verification at cryptocurrency exchanges.
Decentralized currencies like Bitcoin are notoriously difficult for governments to contain. However, common Western media reports that people are secretly trading cryptocurrencies behind the backs of Chinese authorities are completely incorrect. Put another way, if Binance had done $90 billion in trade in China, Chinese authorities would likely have known something about it.In fact, it’s the same WSJ article It noted that local law enforcement agencies have worked closely with Binance to identify criminal activity among the exchange’s more than 900,000 active users.After checking online crypto exchanges and interviewing retail investors, Reuters I found that. “Accessing Bitcoin is not that difficult on the mainland.”
The fact that so many crypto transactions survived the “ban” suggests that China had no intention of erasing cryptocurrencies from the map. Instead, the main goal was to raise barriers to entry. In that sense, the new rules were extremely effective. Making transactions more inconvenient will help prevent cryptocurrencies from reaching many uninformed investors. The last thing Beijing wants is for those same investors to take to the streets to protest their losses. It all comes back to maintaining social stability, which is one of the key principles of China policy.
China has reason to be wary of virtual currencies. We don’t want people to use it to evade capital controls, for example. At the same time, China has long embraced the potential of blockchain technology, and Beijing has further Web3 White Paper. The country has ambitious plans for a central bank digital currency. Authorities may want to keep the door slightly open to cryptocurrencies themselves, just in case.
This theory could help explain what is happening in Hong Kong. The city has taken very public steps to establish itself as a city. digital asset hub Asia, if not the world. Hong Kong and China operate on a “one country, two systems” basis, and Hong Kong’s relatively welcoming stance towards cryptocurrencies has received at least some approval from the Chinese government. Allowing cryptocurrencies to flourish in Hong Kong, if not on the mainland, is a way for China to remain in the competition while mitigating risks.
In China, we need to look not only at the content of the rules, but also at how people interpret them. Calling China’s policy a total ban on cryptocurrencies is an oversimplification of the situation in one of the world’s most important markets.