China to Implement Cryptocurrency Regulations in 2024
China, once a hub for Bitcoin trading and mining, has faced challenges in regulating cryptocurrency. The government’s concern is that it could destabilize the country’s economy and devalue its fiat currency. In September 2021, China banned non-government approved cryptocurrencies as part of its efforts to control the risks associated with virtual currencies. The government has also considered developing its own Central Bank Digital Currency (CBDC) and is actively participating in cryptocurrency regulatory development.
In 2011, BTC China became the first crypto exchange in China, marking the country’s early adoption of cryptocurrencies. However, the People’s Bank of China (PBOC) and other authorities have implemented various regulations over the years. In December 2013, they released a circular that prohibited financial institutions from conducting Bitcoin-based businesses. Then, in September 2017, the PBOC issued an announcement stating that initial coin offerings (ICOs) and virtual currencies do not have legal status and cannot be used as currency in the market. This led to the ban of ICO activities and forced Binance to move its operations outside of China.
The most significant regulatory document, Circular 237, was released in September 2021. It emphasizes the illegality of virtual currency-related activities and targets offshore virtual currency exchanges serving Chinese residents. Financial institutions and payment service providers were also instructed to prohibit any services related to virtual currency transactions. The circular also highlights the need for enhanced supervision and monitoring of virtual currency trading and speculation. Furthermore, the National Development and Reform Commission issued a circular in September 2021 to regulate virtual currency mining activities.
Regarding taxation, as cryptocurrencies are deemed illegal in China, there is currently no specific tax regime in place for crypto taxation.
In terms of legality, Bitcoin trading, DeFi, mining, and NFTs are all considered illegal in China according to the government’s stance.
While China has shown a negative attitude towards cryptocurrencies, there have been rumors suggesting a potential easing of restrictions. However, it is unlikely that China will fully embrace crypto in the near future due to the government’s concerns and regulatory approach.
China has achieved significant financial inclusion through government-approved digital financial technology. The introduction of the digital renminbi reflects the government’s control over the digitized financial and monetary system. Therefore, it is unlikely that decentralized cryptocurrencies will be welcomed anytime soon, considering the government’s investment in the digital yuan.
It is important to note that Hong Kong’s financial system operates differently from mainland China’s and aligns more closely with the global financial system. There is no expectation that the financial systems of mainland China and Hong Kong will converge.
In conclusion, China has faced challenges in regulating cryptocurrencies and has taken strict measures to control their risks. The government’s focus is on maintaining stability in its economy and financial system. As of now, cryptocurrencies are deemed illegal, and the government’s stance is unlikely to change significantly in the near future.