Cryptocurrency regulation

Cryptocurrency Regulation in China

Written by: Qadir AK

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Qadir AK

Qadir Ak is the founder of Coinpedia. He has over a decade of experience writing about technology and has been covering the blockchain and cryptocurrency space since 2010. He has also interviewed a few prominent experts within the cryptocurrency space.

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Apr 6, 2022

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China gave Breaking news of the cryptocurrency ban last year, China is one of the countries that has either completely banned crypto or locked and unlocked crypto by updating several regulations in the country. The process of banning crypto in China passed over several phases such as it first prohibited financial institutions from any form of virtual transactions, and then banned all kinds of domestic crypto mining in the month of May-June respectively. Finally in September China Outlawed the cryptocurrency completely.

China Crypto Regulations 2022

31-03-2022: WeChat suspends a dozen NFT public accounts.

A dozen NFT public accounts are suspended by WeChat to clean up crypto speculation and reselling. and The public account content marketed digital collectibles is no longer visible, searchable on Tencent’s messaging app. The reputed Chinese Tech Companies have ramped up their efforts to rein in NFT- related content amid concern from the government about speculation.

4-03-2022: Digital E-Yuan To Be Formally Launched In Beijing Winter Olympic

China’s central bank has rolled out a digital yuan, dubbed e-CNY, for Olympians and visitors during the Winter Games. The digital yuan’s international debut for global users during the Winter Olympics follows more than a year of pilot runs in about a dozen regions across the country.

24-2-2022: China tightens law to jail those found raising funds through crypto sales

China’s highest court amended its interpretation of the country’s Criminal Law to make raising money from the public through “virtual currency” illegal, according to a statement today. The amendment came into force on March 1st, 2022. Jail terms will vary from below three years to over ten years, depending on the amount raised.

17-1-2022: BSN blockchain network to launch NFTs

The Blockchain Services Network, a Chinese state-backed blockchain company, plans to roll out infrastructure that would allow individuals and businesses in China to make, sell, and buy NFTs.

Yet with public blockchains and decentralized crypto assets prohibited in China, the country has largely sat out of the NFT boom. In a Medium post published on Jan. 17, BSN said that its NFT ecosystem will have no links to cryptocurrency and all transactions will be settled in Yuan.

1-1-2022: China moves to ban internet marketing services for crypto

The regulation, drafted by the People’s Bank of China — China’s central bank — and other Chinese government institutions stipulate that any organization or individual is not allowed to provide internet marketing services for illegal financial activities, which include “virtual currency transactions.” The draft is published for public opinion until Jan. 31.

Crypto taxation in China

Paying Crypto taxes based on the income accomplished by crypto transactions in China, the State Administration of Taxation on issues regarding the application of individual income tax on individual income retrieved by crypto trading over the internet represents, that the individual returns on crypto by purchasing virtual currency from game players and selling them to other individuals at a mark-up will be the taxable income for individual income tax. Further, this would be computed and paid under the item of “property transfer income”.

Crypto Mining in China 

Even though crypto-mining cracked down in China many miners have come out with several ways to continue the operations and escape detection. Twenty percent of the bitcoin network remains in China according to experts’ report. 

Crypto mining in China has dominated 2/3rd of the whole world’s transactions. It has also controlled about 66% of the power of computers across the globe which is known as ‘hashrate’, which further dictates a computer’s ability to produce new coins. 

Apart from this Mining Chip manufacturers work day and night to develop even more powerful processors. It’s quite obvious that the more powerful the processor is, the consumption of electricity also is extensive. Approximately 73.12 TWh of power is required annually. 

Bitcoin completes 7 transactions per second and about 308 KG of CO2 is emitted for each individual transaction. This is approximately 4000 bathtubs filled with CO2 for each transaction which is quite a huge amount. Apart from these new machines are replaced by old ones. This leads to numerous waste as they are not recycled.

Historical Announcements and Events

2021

08-12-2021: Victor Wei says the HOng KOng based firm is not allowed to engage with clients from China. Hong Kong’s homegrown investment bankers are rapidly losing their status as the city’s go-to dealmakers. They say it’s partly explained by a reluctance among Chinese securities firms to hire and promote Hongkongers after anti-government protests rocked the former British colony in 2019.

09-10-2021: Bakkt announced its partnership with Google to extend the reach and usability of digital assets to achieve rapid evolving consumer demand and preferences. McDonald’s China launches its first Non-Fungible Token Named Big Mac Rubik’s cube in celebration of McDonald’s 31 years of existence on the Chinese mainland. Further, BlockFi jumps into the Bitcoin ETF race, and JP Morgan institutions are rotating out of Gold into Bitcoin.

24-09-2021: Central Bank of China says all cryptocurrency transactions are termed illegal in the country,by banning Bitcoin effectively.”Virtual currency-related business activities are considered illegal financial activities” in the country, warning endangers the safety of people’s assets. China’s top regulators ban crypto trading and mining. SAHNGAL/LONDON, Sept 24 (Reuters) – an intensified crypto crackdown, hitting Bitcoin, and other major coins have been intensified by China’s most powerful regulators.

29-08-2021: People’s Bank of China Deputy Director says Bitcoin has no value, hence the Institution also plans to crack down on the space by blocking crypto trading websites, applications, and corporate channels.

29-06-2021: The options for crypto derivatives traders in China are getting smaller. As specified in a user agreement update, crypto exchange platform Huobi banned derivative trading for Chinese users, amid a broader cryptocurrency crackdown from the government. 

26-06-2021: The CHina’s crackdown has resulted in a mass exodus of miners, Peter Wall, CEO of North American cryptocurrency mining firm Argo Blockchain.Displaced Chinese miners are searching for appropriate hosting sites for their machines around the globe.  

06-06-2021: In China recent events have pushed crypto miners to evaluate domestic risks as they are looking forward for international expansion.The state Council’s Financial Stability and Development Committee reported on May 2021 Bitcoin mining amid financial risk concerns, South China proclaims that China’s place at the centre of global bitcoin mining is fading.

18-04-2021: PBoC vice governor says China regards crypto assets as investment alternatives.The People’s Bank vice governor has said the country regards bitcoin and stablecoins as crypto assets – not as currencies – hence they are considered as investment alternatives. 

2020

06-12-2020: Cryptocurrencies worth billions of dollars have been seized during the police crackdown on the PlusToken Ponzi scheme in China. The police crackdown has resulted in billions of dollars of cryptocurrencies being seized. 

04-02-2020:- Bitcoin miners face severe regulation in china. The government plans to distribute currencies through traditional banks and the monetary system. Which would make the entire process centralized contradicting the fundamental nature of the cryptocurrency to be decentralized.

10-01-2020:- The People’s Bank of China said that it has completed the top-level design, standard formulation and functional research & development of the digital Yuan coin. Initially, the coin will be distributed only in Shenzhen and Suzhou banks. The users can register with the bank wallets. However, the release date is not yet announced.

2019

22-12-2019:- People’s Bank of China official in charge of digital Yuan reveals the nature of the digital currency as reported by Shanghai Securities News.. He stated that it will not require any backing of currencies, unlike Bitcoin. Mu Changchun, head of People’s Bank of China digital currency institute said,

“The currency is not for speculation. It is different from bitcoin or stable tokens, which can be used for speculation or require the support of a basket of currencies.”

09-08-2019:- A recent report revealed the plans of distribution of cryptocurrencies among the seven entities. These include the Bank of China, The industrial and commercial bank of China, the Agricultural Bank of China, technology companies like Alibaba, Tencent, Union Pay and an association of Chinese banks. 

“The central bank’s digital currency can be circulated as easily as cash, which is conducive to the circulation and internationalisation of the renminbi,”  said Mu Changchun, deputy director of the Paying Division of the People’s Bank of China (PBOC) and the new head of China’s cryptocurrency research lab.

12-04-2019:- The National Development and Research Commission(NDRC), a state-planned body that administers China’s economy had a list of 450 wasteful and hazardous activities. They had proposed to add cryptocurrency mining in the list and also recommended to completely eliminate them. After implementation, the government would increase the electricity prices so that the mining companies are forced to shut down or relocate.

2018

24-08-2018:- The Chinese regulators published strict warnings against illegally raising funds through sale and trade of crypto tokens.

17-08-2018:-  The China National Fintech Risk Rectification Office identified 124 overseas currency exchanges that were accessible within the country. China plans to block access to these platforms within the country.China shut down blockchain news accounts on the WeChat social app and also banned hotels from hosting cryptocurrency events.

28-06-2018:-  A court in China’s Hangzhou city, in its official judgement, said that the evidence authenticated by blockchain technology can be produced as a piece of evidence on a case-by-case basis.

The judge commented:

“The court thinks it should maintain an open and neutral stance on using blockchain to analyze individual cases. We can’t exclude it just because it’s a complex technology. Nor can we lower the standard just because it is tamper-proof and traceable. … In this case, the usage of a third-party blockchain platform that is reliable without conflict of interests provides the legal ground for proving the intellectual infringement.”

29-03-2018:- Vice Governor of the Central Bank, Fan Yifei said that the government released a report stating its plan to launch a crackdown on all types of virtual currencies in 2018. The deputy governor also stated that it will push forward the research and development of its own digital currency. 

2017

04-09-2017:- China banned all the companies and individuals from raising funds through ICO’s. The ICO activities were considered illegal in the country. 

The People’s Bank of China said in a report that 70% of the ICO’s were fraudulent and also ordered the operators to return money to the investors. As the government feared that the fraud could lead to social problems like corruption, ICO and domestic Bitcoin exchange was banned in China. This led to the exodus of many companies out of China. But the demand for fundraising using ICOs was still in huge demand. Some ICO sites in China were still accessible without going through a virtual private network.

05-08-2017:- The People’s Bank of China announced its plans to increase supervision and regulation of China’s financial industry including the Macro-Prudential Assessment(MPA). This business includes P2P lenders, third party online payment platforms, crowdfunding companies and other financial services.

2016

09-11-2016:- China government put up a job recruitment ad for blockchain experts to assist in developing their own currency. 

21-01-2016:- The People’s Bank of China conducts a digital currency study and is on the verge of developing its own digital currency regulated by the government.

2015

China dominated the Bitcoin Mining sector by acquiring at least 50% of the global bitcoin network mining power. The bitcoin mining giants were F2Pool, AntPool, BTCC, Pool and BW.com which accounted for half of Bitcoin’s network hash rate.

2014

China is said to have improperly banned and unbanned bitcoin in 2014. The cryptocurrency was not officially outlawed nor did any local businesses. The comments from the People’s Bank of China in Dec 2013 and a false report which circulated that China banned Bitcoin completely which led to a decline in value of the currency throughout the year.

In April 2014, some banks started closing the accounts of bitcoin businesses and exchanges. In a joint statement by the CEO’s of China’s five most prominent exchanges, OKCoin, Huobi, BTC China, BtcTrade and CHBTC, made clear that they do not encourage excessive speculation in digital assets and any further development in the industry would be intimated to the authorities.

In the latter half of 2014, OKCoin and Huobi exchanges started operating in Singapore and Hong Kong respectively focusing on markets outside China but always made feel their presence felt in China. BTCC continued to offer its service in English.

2013

In the first three months, China’s relationship with Bitcoin was virtually non-existent. A handful of scattered miners and exchanges who had launched in 2011, we’re now being recognized by the public. A deadly earthquake hit Ya’an on 20 April 2013. A non-governmental organization One Foundation, well known for its contribution to disaster relief, children’s welfare, and various works for society, thought to get donations which the public possessed. That’s Bitcoin!!! On 21st April 2013, the organization released their thoughts publically and within two days, they received 230 Bitcoins in donations that amounted to $2.4 million. The three largest donations were 88,39 and 25 BTC whereas the remaining were below 10BTC. 

The trade volume on BTCC had increased by 30% and Bitcoin clients were downloaded heavily and crossed the numbers above the United States on 23 April 2013. In between June-Oct Chinese Bitcoin community had thrived to become the largest in the world. The Chinese search giant Baidu started accepting Bitcoins for its website security services.

Gaining immense popularity and acceptance, Bitcoin touched its peak of $1242 on 29 November 2013. This alarmed the Chinese government as it was considered a threat to the fiat currency of china. And hence on 5 Dec 2013, China Banned banks dealing with bitcoin but not internet transactions. This led to a plunge in the prices by 30% to $961 by 10 Dec 2013.

2011

China came out be the second-largest economy in the world in 2010 and released its 12th Five Year Plan in early 2011. This plan included development in various industries, next-gen information and technology is one of them. 

In June 2011, Bobby C Lee, an entrepreneur who now serves on the board of directors of the Bitcoin Foundation, founded the very first Bitcoin exchange called BTCC. Most of the customers were from the domestic market.

2009

China was one of the world’s biggest markets for multiplayer online gaming like World of Warcraft. Millions of youths who involved themselves were believed to carry out the trade of virtual goods and credits for real goods and cash. At the same time, the QQ coin, a form of virtual currency, produced by the Chinese internet giant Tencent, became very popular for trading for real goods.

This raised the alarm for the officials at the Central Bank of China as people started trading virtual currencies for clothes, and cosmetics too. Many online marketplaces, like eBay and China’s Taobao, advertised for the sale of virtual goods like World of Warcraft coins. Hence China banned the use of virtual currencies in June 2009.

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Qadir AK

Qadir Ak is the founder of Coinpedia. He has over a decade of experience writing about technology and has been covering the blockchain and cryptocurrency space since 2010. He has also interviewed a few prominent experts within the cryptocurrency space.

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