Briefly

• China’s history with cryptocurrencies is complex, characterized by frequent prohibitions and their effect on the cryptocurrency market.
• China’s hardline stance on cryptocurrencies may be changing, according to recent signs, drawing significant international attention.
• The Chinese ban on cryptocurrencies could be lifted, resulting in increased demand and prices for cryptocurrencies.

China’s position on cryptocurrencies has always had a significant impact on the crypto market because it is one of the largest economies in the world. Despite this, China’s history with cryptos is quite complicated. It necessitates examining the potential repercussions of lifting China’s crypto ban and comprehending the reasons behind its notorious bans.

The future of cryptos in China is in jeopardy, with significant repercussions for the industry worldwide, as recent signs point to a possible policy shift.

Update May 27 at 13:01 UTC: In a white paper titled “Web3 Innovation and Development White Paper (2023), Beijing promotes web3 technology as an essential component of internet expansion in the future. The document was made public by the Beijing Municipal Science & Technology Commission with the intention of making Beijing a global center for digital economy innovation. As a component of this arrangement, the Chaoyang locale will contribute around $14 million every year until 2025. Beijing’s commitment to bolstering policy support and accelerating technological advancements to propel the web3 industry is emphasized in the white paper.

China’s History of Banning Crypto

The People’s Bank of China (PBC) made the first attempt in 2013 to prohibit financial institutions from transacting in virtual currencies like Bitcoin. China has a long history of imposing restrictions on cryptocurrencies.

However, this did not prohibit Chinese citizens from purchasing, storing, or sending cryptos. Simply put, it made it more difficult to access cryptocurrency from exchanges.

This first boycott was pointed toward dialing back Bitcoin exchanging, as it had become so inescapable that numerous organizations, including the country’s biggest web index Baidu, started tolerating it as installment.

During the cryptocurrency bull market of 2017, Chinese authorities increased their sanctions against cryptocurrency trading, focusing primarily on Initial Coin Offerings (ICOs). ICOs, computerized tokens intended to address a proprietorship stake in a new crypto project, have seen a huge expansion in exchanging.

However, the lack of regulation led to the scamming of many of these ICOs. China outlawed all platforms that offered ICOs in an effort to quell the ICO craze. Investors were required to receive their money back if an exchange sold ICOs.

China took the most severe crypto-related measures in its history in 2021. China’s State Council announced a formal ban on crypto mining as Bitcoin hovers around $55,000.

The Bitcoin price plummeted to approximately $30,000 in the months that followed as a result of a 50% decrease in the hash rate on the network.

Alongside the Bitcoin mining boycott, China’s administrative bodies banned all crypto exchanging and exchanges. Businesses and banks cannot accept coins like Bitcoin or Ethereum, and residents cannot send cryptocurrency.

Chinese residents who already have cryptocurrency in a wallet do not violate any existing laws because, despite the ban, there are no specific policies against holding digital assets.

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Why China Banned Cryptos

A few elements drove China’s choice to boycott cryptos. These are some:

• concerns about consumer safety because cryptos are linked to money laundering and scams.
• The hazy lawful status of computerized monetary forms.
• the possibility of capital fleeing.
• The cheapening of the yuan.
• Concerns about the environment as a result of Bitcoin’s high energy consumption.
• a desire to control metaverse projects and Central Bank Digital Currencies (CBDCs).
• Indeed, cities like Shanghai have committed billions of dollars to the development of national metaverse projects, and China is actively working on an official CBDC known as the “digital yuan.”

The global crypto market was significantly affected by the ban. The Bitcoin blockchain’s hash power decreased significantly as a result of China’s ban on Bitcoin mining. Numerous Bitcoin miners from China fled to countries that were more favorable to the cryptocurrency industry.

However, in the months that followed the ban, Bitcoin’s total hash rate continued to rise, and by January 2022, it was significantly higher than it had been prior to China’s Bitcoin ban.

It was also observed that mining activity in China appeared on Bitcoin’s network in September 2021, suggesting that many Chinese mining pools still operate underground​​.

Is China Lifting the Crypto Ban?

China’s cryptos ban has not completely halted industry activity, despite the stringent restrictions. Underground crypto markets have grown up as crypto aficionados in the nation keep on tracking down strategies for getting around the limitations.

However, recent signs point to a possible change in China’s attitude toward cryptocurrencies.

The most recent development suggests that China may be softening its hardline stance on cryptocurrencies. This information is important because China’s most significant crackdown on digital assets yet in 2021 was one of the crypto market’s biggest shocks in recent years.

This crackdown was part of a wider effort to regulate the financial technology sector. It was also in line with China’s ambition to introduce its own digital currency, the digital yuan.