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China China Guide

Country overview Over the past few decades, China’s influence in the world has been growing at an enormous pace. It has become the de facto manufacturing center of the entire world. It already has the second highest GDP in the world, just behind the United States, with over $13 trillion. It has grown from a […]

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Country overview

Over the past few decades, China’s influence in the world has been growing at an enormous pace. It has become the de facto manufacturing center of the entire world. It already has the second highest GDP in the world, just behind the United States, with over $13 trillion. It has grown from a country of farmlands into an industrial powerhouse. While some people see China as just manufacturing plants, most major cities in China are filled with skyscrapers and a bustling city life. As the world became more globalized, China has regained its role as being at the center of it just like in the old times of the silk road. We are all so interconnected that the saying “when China sneezes, the rest of the world catches the cold” is more true than ever.

As for cryptocurrencies, China’s influence has been gigantic as well. China used to account for more than 60% of the total volume worldwide. However, a ban was placed 2017 with crackdowns happening in 2018. The succeeding months saw more bans targeting ICOs and exchanges. This led to a flight of many companies. However, these chinese owned companies and mining pools still hold significant control of the market. Chinese companies and mining pools produce more than half of the hashrate for the Bitcoin network. They are also major supporters in other top blockchain projects such as Ethereum and EOS. It is a source of major demand as well with a flourishing OTC sector. This is why Chinese events, news and regulations have always exerted major influence over the price of Bitcoin and the industry as a whole. Lately, China has embraced blockchain, the underlying technology of Bitcoin and cryptocurrencies. President Xi mentioned that it will be a key technology for China in the future. As for cryptocurrencies, it’s a different story.

Bitcoin and other cryptocurrencies are not considered legal tender in China. In fact, financial and payment institutions are not allowed to set the price of products in terms of Bitcoin solidifying its stance that Bitcoin is not a currency. However, they are recognized as assets which citizens can hold and transfer just like properties. Several court cases have already declared Bitcoin as legal assets showing that China isn’t restricting access or ownership to cryptocurrencies. As an example, a recent court case regarding stolen Bitcoins revealed that the Chinese court considered Bitcoin to be an asset protected by the law. The chief judge in the case further noted China never denied Bitcoin as an asset and the laws do not prohibit citizens from holding or owning Bitcoins.

Exchanges

Despite being open to blockchain technology, China’s stance towards cryptocurrencies are more hostile. In late 2017, cryptocurrency exchanges were effectively banned. This led to more than 150 exchanges in China closing their operations.

China and Mining

China is currently the mining hub of the world. More than 60% of the hashrate that secures the Bitcoin network is concentrated in China. These are a combination of mining farms and mining pools. The top ASIC (Application-specific integrated circuit) mining rig manufacturers are all based in China such as Bitmain, Innosilicon and Canaan Creative.

Crypto Regulations in China

When it comes to cryptocurrency regulations, China’s relationship with Bitcoin and cryptocurrencies have been a roller coaster ride. On multiple occasions, China has effectively banned or restricted several aspects of cryptocurrency trading. In 2013, the Chinese government banned Bitcoin from banks and domestic exchanges. In 2017, China bans ICOs and domestic Bitcoin exchange activity. However, as recent as 2019, President Xi Jinping stresses the importance of blockchain investment for China’s future.

China Bans on ICOs

Initial coin offerings (ICOs) are banned in China. This was announced in September 2017 after seven Chinese central government regulators—the People’s Bank of China (PBOC), the Cyberspace Administration of China (CAC), the Ministry of Industry and Information Technology (MIIT), the State Administration for Industry and Commerce (SAIC), the China Banking Regulatory Commission (CBRC), the China Securities Regulatory Commission (CSRC), and the China Insurance Regulatory Commission (CIRC)—jointly issued a statement regarding ICOs. This is a form of investor protection as well as a form of preventing the flight of funds away from China. Those that engage in ICOs can be considered financial crimes such as illegal issuance of tokens or securities, illegal fundraising or financial fraud.

Digital Yuan

The Chinese government announced in 2020 that they are developing and testing their own state-run blockchain based digital currency. It is called DC/EP which is short for Digital Currency Electronic Payment. Once this is implemented, it could be the world’s first Central Bank Digital Currency (CBDC). It’s main aim is to take on the US dollar when it comes to global reach. One example is where African companies can trade directly with the Chinese Yuan without having to go through the US dollars. This allows China to undercut the global financial infrastructure that still relies heavily on the U.S. dollar. This digital Yuan will be initially tested in several major cities such as Shenzhen, Suzhou, Chengdu and Beijing. The initial test involves government employees receiving their transport subsidy in the digital currency.

Buying Bitcoin and Cryptocurrencies in China

Based on the bans and regulations mentioned above, buying Bitcoin and other cryptocurrencies can be harder in China. Its laws and regulations ban users from buying cryptocurrencies with fiat money. The main way for users to buy is through a peer-to-peer manner. Most are done in peer-to-peer chat groups that are mostly based in Wechat. Another option is through OTC desks. Once users get either Bitcoin or USDT, they can then proceed to use crypto only exchanges that operate within China. As for Bitcoin ATMs, this is not an option available within China.

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