China’s Shifting Stance on Cryptocurrencies: A Deep Dive

For many years, China has maintained a contentious relationship with the cryptocurrency industry. Marked by a series of stringent measures against crypto adoption, China’s stand has been characterized by:

• Banning banks from Bitcoin transactions in 2013.

• Prohibiting initial coin offerings (ICOs) in 2017.

• Targeting Bitcoin mining operations in 2019.

• Implementing a comprehensive ban on cryptocurrency trading and mining in 2021.

Despite this historical opposition, recent rulings from China’s People’s Court challenge the prevailing stance of the Chinese Communist Party (CCP) towards cryptocurrencies.

Cryptocurrencies Recognized as Legal Property

A groundbreaking report titled “Identification of the Property Attributes of Virtual Currency and Disposal of Property Involved in the Case” issued by the People’s Court in China, recognized virtual assets as possessing economic attributes that categorize them as property. This is a significant departure from China’s longstanding policies against foreign digital assets. Key highlights from the report include:

• Cryptocurrencies have economic value and should be viewed as legal property protected under Chinese law.
• In spite of the nationwide ban on cryptocurrency transactions issued by China’s Central Bank in September 2021, the court’s ruling implies that crypto holdings cannot be confiscated.
• The court suggests that crimes involving digital assets should be approached differently compared to those with traditional property.

Odaily’s Insight and Previous Legal Standpoints

Beijing-based Web3 news outlet, Odaily, brought to light that the People’s Court of China has ruled that virtual currency should not be automatically deemed illegal within the nation’s legal framework. This is in stark contrast to the strict regulatory policies imposed by the CCP over the years.

It’s worth noting that this is not an isolated incident. A 2018 case in Hangzhou also recognized Bitcoin as a “virtual property,” validating its attributes of value, scarcity, and responsibility. This precedent adds another layer of complexity to the ongoing debate over the legality of digital assets in China.

Decentralized Cryptocurrencies vs. Centralized Control

China’s relationship with blockchain and cryptocurrency portrays an ongoing tension between innovation and centralized control. The country has:

• Demonstrated significant interest in blockchain technology.

• Published national blockchain standards for industry guidance.

• Established a national blockchain research center.

• Made strides towards introducing the digital yuan, which could be the world’s first genuine Central Bank Digital Currency (CBDC).

However, this enthusiasm doesn’t extend to decentralized cryptocurrencies. The Chinese government’s preference lies in technologies it can regulate and control, such as the digital yuan. This currency is centrally issued and controlled by the People’s Bank of China, reflecting the state’s aspiration to maintain a tight rein over its financial system.

Recent Crackdowns and Implications

Despite the recognition of cryptocurrencies as legal property, Beijing’s crackdown on crypto-related activities persists. A former senior official in Jiangxi province received a life sentence for taking bribes linked to supporting illicit crypto mining operations. This action exemplifies the ongoing punitive measures Beijing continues to impose on digital asset experiments and related officials.

Conclusions and the Path Forward

The acknowledgment of virtual assets as legal property by the People’s Court signifies a notable milestone in China’s cryptocurrency landscape. However, there are crucial factors to consider:

• While the court’s report doesn’t directly counter the existing ban on crypto trading and mining, it opens doors for more nuanced future regulatory discussions.

• China’s historical position, coupled with recent rulings, raises questions about its evolving viewpoint on digital currencies.

The cryptocurrency community is keenly observing these developments, waiting to see how this legal recognition might shape China’s regulatory environment. The road ahead remains uncertain, but the recent rulings undeniably spotlight an essential progression in China’s cryptocurrency narrative.

Only time will tell how China’s cryptocurrency narrative will evolve, but it’s certain that its decisions will continue to reverberate throughout the global financial ecosystem.