Bitcoin and other cryptocurrencies have had a rocky relationship with China over the past few years, with the Bitcoin trading volume being extremely difficult to measure since the country banned exchanges in 2017. Bitcoin was not recognised as legal tender, thus citizens could own bitcoin but it was extremely challenging to trade or convert them into legal tender. Though Bitcoin trading was illegal, with the initial coin offerings used to fund new blockchain projects being prohibited and banks being limited in bitcoin trading – China was still the epicentre of global cryptocurrency mining.
Last year the perception of cryptocurrencies in China could be seen to be evolving due to the bitcoin boom in 2018. Realising that cryptocurrencies were becoming widely accepted globally and in China, the state made a move to protect their citizens’ rights. In 2019, China recognised bitcoin trading in court and passed laws that paved the way for cryptocurrencies to be legitimised as digital assets and treated as such to protect the assets and rights of their people. Soon after this law was passed, the state-owned bank of China which is the world’s fourth-biggest bank by assets posted a pro-bitcoin infographic on its website. This graphic explained the history of bitcoin, explained how cryptocurrencies work as well as the value of these digital currencies – showing the first step of national acceptance and encouraging more citizens to become informed of bitcoin as a recognised digital currency. Earlier this year further progress was made in the protection of digital assets in China as the state passed the Code of the People’s Republic of China, stating that all digital assets, including cryptocurrencies, are allowed to be inherited. This law gives increased incentive for people to invest in cryptocurrency as it can now be legally passed on – showing that China is taking massive leaps towards recognising digital currencies’ as legitimate assets.
These changes in regulations are not only due to the increased adoption of bitcoin and other digital currencies but to regulate China’s new national blockchain platform BSN (Blockchain Service Network) which is currently in the early stages of being implemented. The platform is the first step to launching a government-backed crypto-yuan currency, which could change the financial game around the world. This new currency will be different from that of Bitcoin and other cryptocurrencies as it’s not for speculation but will act as an electronic version of a banknote or coin that will live in a digital wallet instead of a physical one. The currency’s value will be backed by the state and will be quicker and easier to access than the paper form. This level of digitisation will also allow the Chinese authorities a degree of control that was never possible with physical money.
Will this new crypto-yuan become serious competition for other cryptocurrencies? For now, it is too soon to tell but the new laws to enforce this government-backed platform have made it easier and more profitable to own digital currencies in China. A new financial era has dawned, but time will tell if consumers will trust the new cash technology and the power behind it. China’s changing attitude towards Cryptocurrencies just goes to show that this is not a fad, cryptocurrencies are here to stay and will play an increasingly important role in the economy.