- While China banned in 2017 ICOs and some crypto projects, the use of Bitcoin remains legal in the country
- Regardless, the overflow of Bitcoin in the country has been on a rise, peaking at $17.5 billion in 2020
- China favors the adoption of blockchain and CBDC over Bitcoin
- The central bank digital currency of China has piloted, with bigger states joining the train
Since the crypto industry debuted in 2009, China has been one of the biggest hubs of cryptos and blockchain technology. Although China doesn’t have policies that favor cryptos, it has some of the best blockchain-related policies.
China’s Current Regulatory Framework
China, like every other country, has had its fair share of scuffles with the crypto industry in a bid to regulate the growing industry.
In September 2017, China banned initial coin offerings (ICO) were banned. Some exchange platforms that facilitated their launch and traded them were also ordered to be closed following the crackdown on ICO.
Interestingly, it is not illegal to hold Bitcoins and other cryptocurrencies or even to buy or sell them in China.
Despite the blanket ban Chinese authorities placed on ICOs and to some extent cryptos, adoption and use in the region have been on the rise.
China’s Policies vs Crypto Use in the Country
Despite China not having the most favorable crypto policies, the country continues to record more capital flight via cryptocurrency. The government previously enacted a $50,000 annual limit on foreign exchange purchases. Crypto became the next option.
More than ever before, citizens of China are moving their funds and transacting with cryptos as a safeguard against the weakening yuan. For example, in March 2020, approximately 172,000 Bitcoins were moved out of China, the most of any country.
According to Coinholmes, China recorded a capital total outflow of over $17.5 billion in cryptocurrency in 2020. This marks a 50 percent-plus increase from the overflow of Bitcoin in 2019 figure, $11.4 billion.
On the Flipside
- Panamanian lawmakers are looking to start a draft bill that seeks to regulate cryptocurrencies in the nation
- Cryptocurrencies have been largely unregulated in the country but could change soon
- Early signs show that the lawmakers are advocating to pursue an agenda focused on digitalizing the Panamanian economy with blockchain and cryptos
China Favors Blockchain Adoption and CBDC
In October 2019, President Xi Jinping openly backed blockchain technology, stating the need for the advancement of the technology in China. Since then, we have seen government agencies launch blockchain projects.
China now has a blockchain-friendly act that is aimed at helping startups launch blockchain projects. In 2020, China announced the Blockchain-based Service Network (BSN), a nationwide Blockchain network seeking to integrate smaller blockchains into a much larger network controlled by the government.
In April 2020, China announced its intention to digitize the Renminbi (another name for the Yuan) also known as the Digital Currency Electronic Payment (DCEP).
China has already announced test run projects for its central bank digital currency (CBDC). China’s biggest cities are planning to hold pilots to test the digital yuan (DCEP) this year. There are speculations that the push for a faster adoption is a move to curb the growing outflow of bitcoin.
Although China maintains an unfriendly stance towards bitcoin remains unfriendly, the government has backed the adoption of blockchain technology and promoted it, as it seeks to dominate the global blockchain scene.