While people are slowly recognizing cryptocurrency’s value, China is still hesitating. Accordingly, the country has taken some strong steps against cryptocurrencies in the past few years. Though the intent is not always wrong, the implementation remains questionable. We take a deeper look.
So what’s crypto trading in China really like? Let’s begin the examination by recalling the circumstances of the ICO ban.
When ICOs were banned
On the 4th of September 2017, seven Chinese governmental agencies jointly issued a notice regarding the Prevention of Risks of Token Offering and Financing. These agencies include the People’s Bank of China, the Central Cybersecurity and Information Technology Lead Group of the Communist Party of China, the Ministry of Industry and Information Technology. As well as the State Administration for Industry and Commerce, China Banking Regulatory Commission, China Security Regulatory Commission, and China Insurance Regulatory Commission.
To remind, the notice banned all ICOs in China. It ordered the organizations and individuals who had previously completed an ICO to return token assets to investors and thus protect investor rights.
On September 15, 2017, the Beijing Internet Finance Risk Working Group summoned senior executives of cryptocurrency trading platforms in Beijing. Discussions revolved around two major topics:
- Cease new client registration;
- Announce the deadline for the platforms to terminate cryptocurrency trading.
As a result, the platforms shut down their trading business in China. And such behemoth exchanges like Binance moved to Malta.
Plans to block cryptocurrency websites
In February 2018, the South China Morning Post reported that China was planning to block websites related to cryptocurrency trading and ICOs, including foreign platforms. This way the country aimed at completely removing cryptocurrency trading. However, this move was not implemented.
Cryptocurrency trading is not permitted
The country also imposed restrictions on cryptocurrency trading platforms. According to the Government rule,
- The platforms cannot convert legal tender into cryptocurrencies or vice versa;
- They are also prohibited from purchasing or selling cryptocurrencies, setting prices for cryptocurrencies, or providing other related agent services;
- Government authorities may shut down the websites and mobile applications of platforms that fail to comply, remove the applications from application stores, or even suspend the platform’s business licenses.
Bitcoin mining troubles
Recently, the National Development Reform Commission, China’s top economic planning body, proposed banning all cryptocurrency miners within its borders.
According to the “Leading Group of Internet Financial Risks Remediation” — the country’s internet finance regulator which initiated the clampdown on bitcoin said:
- Bitcoin miners should make an “orderly exit” from China because they have consumed “huge amounts of resources and stoked speculation of ‘virtual currencies”;
- To remove miners, the group asked its local offices to look into policies around the price, tax, land usage and environmental concerns;
- Its local representatives must report back on their progress of removing miners in their region on a monthly basis
Yet, in November it seemed like the country took a U-Turn. After all, the group itself doesn’t control national energy usage but it is an influential political vehicle that’s led by the deputy governor of the People’s Bank of China (PBC), Pan Gongsheng.
Thus, the community should prepare for the worse.
The Cryptography Law
Recently in the 14th Session of the 13th National People’s Congress Standing Committee voted to pass the crypto law, which will be implemented from January 1, 2020.
The Cryptography Law aims to
- Standardize the application and management of passwords;
- Promote the development of the password industry;
- Guarantee the security of networks and information;
- Improve the scientific, standardized, and legalized level of password management.
According to the law, passwords will now be classified into the following categories: –
- Core passwords- Used to protect state secrets and belong to state secrets.
- Commercial passwords- everything else will fall into the category of the commercial one.
Citizens, legal persons, and other organizations will use these passwords to protect networks and other related information.
A total of 5 chapters and 44 articles were published stating details related to usage requirements, security management system, and different safeguard systems and measures to strengthen the passwords which fall in these categories.
The Cryptography Law also states that it will strengthen cryptographic talents. An individual with outstanding contributions will receive rewards and appreciations.
China has not yet passed any legislation regulating cryptocurrencies. At the same time, the regulators are not recognizing them as a means of payment. Also, the Chinese banking system is not accepting any existing cryptocurrencies or providing relevant services.
That said, it is not illegal to hold Bitcoin and other cryptocurrencies, or even to buy or sell them in China. The Chinese government also encourages the development and application of blockchain technology. However, the government has made it clear that blockchain technology must serve the real economy.
Besides, the People’s Bank of China is about to launch its own digital currency.
On a different note, it is quite surprising that in spite of China’s tough stance, many promising crypto projects are from this country. Perhaps, in the long run, China will be able to balance regulation with innovation. While only time will tell what will happen to Bitcoin, it’s vital that we get the foundations right.
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