Beijing has issued a white paper titled “Web3 Innovation and Development White Paper (2023)”, advocating for web3 technology as a crucial component of future internet growth. The Beijing Municipal Science & Technology Commission, which released the document, aims to position Beijing as a global innovation hub for the digital economy. As part of this plan, the Chaoyang district will invest around $14 million annually until 2025. The white paper underscores Beijing’s commitment to bolster policy support and accelerate tech advancements to propel the web3 industry.
China’s History of Banning Crypto
China has a long history of imposing restrictions on cryptos, with the first attempt taking place in 2013 when the People’s Bank of China (PBC) issued rules that prohibited financial institutions from transacting in virtual currencies like Bitcoin.
However, this did not make it illegal for Chinese citizens to buy, store, or send cryptos. It simply made accessing cryptos from exchanges more challenging.
This first ban was aimed at slowing down Bitcoin trading, as it had become so widespread that many businesses, including the country’s largest search engine Baidu, began accepting it as payment.
In 2017, during the crypto bull market, Chinese officials imposed increased sanctions on crypto trading, focusing particularly on Initial Coin Offerings (ICOs). ICOs, digital tokens meant to represent an ownership stake in a new crypto project, have seen a significant increase in trading.
Nonetheless, many of these ICOs became scams due to the lack of regulation. To curb the ICO craze, China banned all platforms offering ICOs. If an exchange sold ICOs, they had to return the money to investors.
In 2021, China took the most severe measures in its history against cryptos. As Bitcoin hovers around $55,000, China’s State Council announced a formal ban on crypto mining.
Shortly after, the hash rate on Bitcoin’s network dropped 50%, with Bitcoin’s price plunging to about $30,000 in the ensuing months.
Along with the Bitcoin mining ban, China’s regulatory bodies outlawed all crypto trading and transactions. It is also illegal for residents to send crypto and for businesses and banks to accept coins like Bitcoin and Ethereum.
Despite the ban, there are no specific policies against holding digital assets, so Chinese residents who already have crypto in a wallet are not violating any current laws.
Why China Banned Cryptos
Several factors drove China’s decision to ban cryptos. These include:
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Concerns about consumer protection due to the association of cryptos with scams and money laundering.
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The unclear legal status of digital currencies.
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The potential for capital flight.
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The devaluation of the yuan.
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Environmental concerns due to Bitcoin’s high energy requirements.
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A desire to control Central Bank Digital Currencies (CBDCs) and metaverse projects.