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- 1 In 2021, the PBOC and other authorities clarified that crypto is not a legal tender in China.
- 2 The country is still working on its central bank digital currency (CBDC), e-yuan.
Another crackdown on cryptocurrencies in China appears on the horizon, although it is not likely to be the same as the nation did in 2021. The country is focusing on illegal foreign exchange in trading to downsize potential risks. Prosecutors and regulators are advised to reinforce their supervision of forex activities.
Authorities to Improve Coordination
South China Morning Post (SCMP), an English-language newspaper, reports that the authorities need to take a closer look at transfers associated with cryptocurrency Tether (USDT) too, as highlighted by government agencies, Supreme People’s Procuratorate (SPP) and State Administration of Foreign Exchange (SAFE), on Wednesday. Tether is a stablecoin, a crypto asset pegged with dollars to stay clear of volatility, unlike other cryptocurrencies.
SPP and SAFE will further improve coordination to “punish fraudulent foreign exchange purchases, illegal foreign exchange transactions and other foreign exchange-related illegal and criminal activities lawfully and handle every case efficiently to effectively prevent and resolve financial risks and maintain national financial security”
Converting the fiat currency, Yuan, to cryptocurrencies, and eventually to other foreign currencies, or the other way around was illegal in China. Users involved indirectly in these activities and provided assistance will be deemed “accomplices” by authorities. The report also mentions a case from 2019 where a user received nearly $6 Million in cash from a Chinese syndicate operating in Dubai and transferred it to his account in China. He was sentenced to seven years.
In 2021, the People’s Bank of China and other government authorities clarified that cryptocurrencies are not legal tender in the nation. The country once served as a leading source for crypto activities. That is why it had a significant impact on the sector. The immediate impact was not visible as the crypto market experienced a boom after the news. However, the sector did go through a crypto winter afterward.
Despite the ban, crypto activities were hardly affected. China’s over-the-counter market drove $86.4 Billion in the market. According to Chainalysis, a blockchain analysis firm, Hong Kong dominates the large institutional cryptocurrency transactions. Nearly 50 percent of annual crypto trades can be attributed to them in the region.
Cryptocurrencies remain barred to this date in China. However, as a member country of the Group of 20 (G20), it has agreed on the proposal to look at the regulatory practices provided by the Financial Stability Board (FSB), an international body overlooking global financial systems. Moreover, the country is still working on its central bank digital currency (CBDC), e-yuan.
CBDCs leverage a technology called blockchain, the same technology underlying crypto. Nonetheless, CBDCs are backed by the government and are more trustworthy. Apparently, the nation removed several crypto influencers from social media platforms. The future of cryptocurrencies is uncertain in the region as the government is under the impression that it may destabilize their official currency.
Anurag is working as a fundamental writer for The Coin Republic since 2021. He likes to exercise his curious muscles and research deep into a topic. Though he covers various aspects of the crypto industry, he is quite passionate about the Web3, NFTs, Gaming, and Metaverse, and envisions them as the future of the (digital) economy. A reader & writer at heart, he calls himself an “average guitar player” and a fun footballer.
