The People’s Republic of China will likely re-legalize cryptocurrency trading, ending its nation-wide ban on crypto exchanges from early September, as reported by cnLedger, a well-known source on cryptocurrency news in China.
The report in question revealed that Xinhua News, recognized by many as the voice of the Chinese Government, published the following statement:
Virtual currencies have become the top choice of underground economies. We shall adopt a ‘zero-tolerance policies’ towards crimes hidden underneath and take measures such as record-keeping, licensing, AML processes, real-name, limiting large transactions.
This is a translation of a passage in the original article, which can be found on the Xinhua Net Chinese site. The original specifically mentions bitcoin (比特币), along with other “fictitious” or “hypothetical” currencies (虚拟货币). In other words, the article specifically refers to cryptocurrencies, and not just “virtual currency,” which, in English, are not entirely similar. The original is also positive about blockchain technology, in general.
This is consistent with China’s previous announcements regarding the government’s stated commitment to reducing the risk of fraud that plagues the cryptocurrency market. When the country first banned ICO’s, ordering that all ICO activity “cease immediately,” it was done because it was believed that ICOs “disrupted economic and financial order.”
Not long afterwards, the Chinese government, the People’s Bank of China, and local financial regulators proceeded to ban all cryptocurrency exchanges with the same concern for “economic and financial order” in mind. China was not alone in this endeavor, as many governments around the world have spoken out against the risks of cryptocurrencies.
The result of these successive Chinese bans was an immediate, though short-lived, drop in the value of bitcoin below $3,000, as well as a similar drop in value of other cryptocurrencies. Seeing as this morning, the value of bitcoin — again — broke the $5,000 threshold, it seems like the global market learned to function rather quickly without the support of the Chinese government.
That is, it learned to function without legal endorsement and regulations in China: not without China.
As predicted by many specialists, and as reported by some news outlets, the ban did not stop crypto traders from finding alternative routes to trade cryptocurrencies, including over-the counter trading and going abroad. In one interview with Coinspeaker, Terence Tsang, the CEO of TideBit, a Hong Kong-based exchange, said that “in the last few weeks, we have seen a lot of mainland customers opening accounts at TideBit… I see a growing need in that they will come to Hong Kong or Singapore to buy cryptocurrency.”
Additionally, even though cryptocurrency exchanges may have been banned in China, the mining of cryptocurrency always remained legal. A few reports have surfaced saying that some bitcoin mining operations in China are shutting down, but Chinese miners still have a huge amount of hash power compared to those in other geographic locations. This means that Chinese miners still had, and continue to have, influence in the global bitcoin and cryptocurrency community.
In this sense, the global cryptocurrency community has never really learned to function without China, because China has always been a big part of it – even after the bans.
Some speculate that China may decide to reverse its ban on cryto exchanges precisely because it has learned that banning exchanges may not be the most productive way to regulate cryptocurrencies. Simply put, in order to have control over cryptocurrencies, it might be necessary to actually erect legal structures governing them, including know your customer and anti-money laundering systems. If this comes to pass, some may say that this was the plan all along.
Still others are likely to agree with the Pan Ye (潘晔), the author of the original Chinese article, that in order to ensure that virtual currencies don’t remain the “top choice of underground economies,” it might be useful to make sure that they are not part of the underground economy by default.3 - Readers Like This Post