China’s Cryptocurrency and Blockchain Regulatory Environment

China has always been a country of contrasts. On the one hand, the boldest technological projects are born here, and on the other hand, the state keeps its finger on the pulse of every innovative movement.

Trusted list of non-GamStop casino platforms can be just as important for players as reliable blockchain solutions are for investors, since both require transparency and trust. This also applies to cryptocurrencies.

While China controlled most of the global Bitcoin market in 2016, just a few years later, the government closed the door to almost all digital currency transactions.

And yet, the country remains a global hub for blockchain development. Why did this happen and what does it mean for investors and companies?

Before 2017, China was a true paradise for crypto traders. According to various estimates, up to 80 percent of global Bitcoin transactions were conducted in yuan.

Chinese miners produced the lion’s share of cryptocurrency mining equipment, and local exchanges set the tone for global trends. Binance, Huobi, OKEx – all these giants have Chinese roots.

The situation changed drastically in September 2017. The People’s Bank of China and other regulators announced a complete ban on ICOs and shut down local cryptocurrency exchanges.

This came as a shock to the market, as thousands of startups had raised funding specifically through tokens. As a result, many companies simply moved to Singapore, Hong Kong, or other jurisdictions.

Legal Framework and Regulatory Approach 

As early as 2013, the authorities made it clear that they did not recognize Bitcoin as legal tender. The government called it a “virtual commodity” and allowed citizens to buy and sell it at their own risk.

At the same time, banks and financial institutions were strictly prohibited from conducting any operations with cryptocurrencies. This was the first sign that the state was keeping its distance.

The next significant step occurred in 2017. The ICO ban destroyed hundreds of projects. The government’s main argument is the protection of investors from fraudulent schemes.

At the same time, the People’s Bank of China closed local cryptocurrency exchanges. This effectively drove the official crypto market underground or abroad.

In 2021, China went even further by banning mining and any cryptocurrency transactions. At that time, the country controlled over 60 percent of the global hash rate.

After the government’s decision, farms closed or migrated to the USA, Kazakhstan, and other countries. The reasons for the ban were explained by risks to financial stability and environmental concerns.

Interestingly, even after the bans, Chinese courts have repeatedly recognized Bitcoin as legally protected property. This means that while cryptocurrency doesn’t have the status of money, private rights to it still exist.

The state has made it clear that income from cryptocurrency transactions is subject to taxation, even if the market itself is strictly prohibited.

The tax authority explained several years ago that profit from the buying and selling of digital assets is considered “income from the transfer of property.”

This means that every transaction must be accounted for, and the absence of proof of the purchase price gives tax authorities the right to independently determine the tax base.

If someone decides to profit from reselling tokens, the tax authorities will demand their share.

This is an important signal that shows the state may not recognize cryptocurrency as money, but only loses interest when it comes to tax revenue.

China’s Blockchain Strategy: Building Without Crypto

While cryptocurrencies were sent into the shadows, blockchain received full support. In 2020, China launched the Blockchain Service Network, positioned as a national infrastructure for decentralized applications.

The idea is simple – to create a single platform where businesses, government structures, and even startups can build blockchain-based solutions without complex technical preparation.

Large corporations have taken up the initiative. Alibaba and Tencent are experimenting with supply chains, financial services, and e-commerce. Logistics companies are using blockchain to track goods, and banks are testing smart contracts to automate settlements.

This demonstrates that the government wants to separate the “speculative” part of the crypto market from the real technological capabilities.

It’s worth mentioning government projects separately. Blockchain is being integrated into data management systems, electronic registers, and even into the development of “smart cities.”

This opens up opportunities to reduce corruption, increase transparency, and improve governance. And here, China makes no secret of its ambitions – the goal is to create global standards.

The Digital Yuan (e-CNY): China’s Answer to Bitcoin

The biggest innovation in recent years is the digital yuan. This is a state-issued digital currency released by the People’s Bank of China. Its key difference from Bitcoin lies in the state’s complete control and stability, as the e-CNY is pegged to the traditional yuan.

Pilot programs are already running in dozens of cities. Citizens can pay for purchases thru special apps, and companies are testing the integration of the digital yuan into payroll systems.

The government is promoting e-CNY even in international projects, viewing it as a tool to reduce dependence on the dollar in international trade. For many countries, this is an example of how money can be digitized while maintaining centralized control.

Global Implications of China’s Policy 

China’s policy has a direct impact on the global market. The ban on mining in 2021 led to a sharp drop in the hash rate and changed the geography of the industry.

The US and other countries gained new opportunities for mining development, while Chinese companies were forced to adapt.

At the same time, the emigration of exchanges and startups abroad contributed to the strengthening of the crypto sector in Singapore, Hong Kong, and Dubai.

You could say that by refraining from direct participation, China still shaped the rules of the game for the entire world.