In September 2017, China conducted a nationwide blanket ban on cryptocurrencies, exchanges, and ICOs.
This had a global impact. After all, before the crackdown, the country of the red dragon accounted for nearly 80 percent of the world’s crypto transactions and ICOs and housed the biggest crypto mining operations. So what happened after the ban?
Well, cryptocurrency development didn’t stop. The miners moved, most going to Mongolia. ICOs registered in Singapore. And the big Chinese exchanges just moved to Japan or Hong Kong. So what’s up with China?
Hope on the Horizon
There is hope on the horizon for miners, investors, and exchanges both in and outside China. As I said, just because the government banned crypto (even if it is the government of the most populous country in the world) doesn’t mean development stopped. Because of this fact, a few new developments have surfaced.
Bitcoin as Actual Property
A business conflict arose over the holding and transferring of crypto assets in China. An unnamed plaintiff signed a contract that allowed the defendant to manage, trade, and invest in a pool of cryptocurrencies on behalf of the plaintiff. As things sometimes go in business, the deal went belly up, and the defendant refused to return the plaintiff’s cryptocurrencies.
A local news outlet reported on a ruling by the Shenzhen Court of International Arbitration, which decided that cryptocurrencies must be legally protected “by law due to its property nature and economic value.”
The Shenzhen Court decided that Bitcoin and other crypto assets should be legally protected by China’s Contract Law, even if crypto is considered illegal tender in the country: “Bitcoin has the nature of a property, which can be owned and controlled by parties, and is able to provide economic values and benefits.”
This is solid news. I dare say it is something like a repressed minority gaining rights. Perhaps that is a bit much as a comparison, but there is some truth to it. Cryptocurrencies are a minority of financial assets. They’re growing. And even though they are illegal tender in China, they are still being given rights.
Cryptocurrencies as Currency
Despite China’s crackdown, cryptocurrencies are being given more than rights in the country—they’re being given use cases. For example:
- September 2018 saw the start of the Ethereum Hotel. This opened in the National Scenic Area of Four Girls Mountain, and it accepts Ether as payment.
- On October 1, Beijing Sci-Tech Report (BSTR)—an established technology news source—announced it would accept Bitcoin as a payment method. Starting in February 2019, its subscriptions may be paid for with BTC. This was done “to encourage the utilization of crypto in a real-world setting for practical actions.”
This all happened thanks to the two digital assets, Bitcoin and Ethereum, being recognized as properties under local laws in China.
Granted, it’s not all rainbows and sunshine. Trading Bitcoin and other cryptocurrencies remains strictly banned. Yes, merchants are technically allowed to accept cryptocurrencies—but trading, crypto events, ICOs, and any form of OTC are still very much prohibited and enforced with jail time.
This could be a significant problem even for non-Chinese traders: Buying into an unregulated ICO is actually one of the biggest mistakes investors make.
ICOs are strictly forbidden in China—no exceptions. But what about STOs (Security Token Offerings), the upcoming darling of the cryptosphere? These are also being watched with apprehension by China.
Pan Gongsheng, acting deputy governor of the People’s Bank of China, spoke at a financial forum in Beijing:
“The STO business that has surfaced recently is still essentially an illegal financial activity in China. Virtual money has become an accomplice to all kinds of illegal and criminal activities.”
Alas, we won’t be seeing STOs in China anytime soon—but they may be coming out of China. Why? Because, despite the caution, people and businesses in China are pressing for the legalization of cryptocurrencies. They understand cryptocurrencies are the future, and if China keeps strangling them, then they risk being left behind.
Featured image: DepositPhotos © Alexis84