Mainland China’s cryptocurrency trading and mining ban, enforced in 2021, continues to remain active today. However, parts of China’s authorities are considering substantial changes on account of severe economic stagnation and an increasing pile of crypto assets being seized within the state.
A Legislative Shift: In Favor Of Treating Cryptocurrency As Assets
Authorities from the finance sector, alongside lawyers and criminologists in China, as per a recent report, are simultaneously defending a judicial recognition of crypto as assets. If accepted, this decision will most likely ease the stringent restrictions China has placed on virtual currencies in the past.
Due to a lack of coherent asset management regulations, China is finding itself in the midst of corruption and inefficiency troubles arising from the management of seized assets due to cryptocurrencies, which are becoming widely regarded as “the currency of criminals.”
Monetizing Seized Crypto: A Tactic To Boost Local Revenue
In the meantime, some local governments in China have begun to liquidate cryptocurrencies through private companies for cash. This method is targeting overseas markets where proceeds are exchanged for yuan by domestic banks and is aimed at easing the plight of local government accounts during the ongoing economic stagnation. As of 2018, one local technology firm, Jiafenxiang, is said to have sold over 3 billion yuan (around $41 million) worth of crypto assets for three local governments: Xuzhou, Hua’an, and Taizhou.
Such makeshift solutions have attracted criticism, and many argue that the approaches being used are arbitrary and disorganized. Some experts even claim that these private sales violate the country’s known prohibition on cryptocurrency trading. Reports from a January seminar on the topic stated that participants were brainstorming potential solutions that included clearly delineating procedures for managing seized assets, establishing a reserve of the digital currencies akin to the one under consideration by the Trump administration of the United States, and some other strategies. Such solutions could encourage increased use of cryptocurrencies in the country.
Divergent Holdings: The Chinese Government’s Cryptographic Waters
The quantity of cryptocurrency assets purportedly under the control of the Chinese government remains contentious. Bitbo Treasuries estimates that the country controls a staggering 194,000 BTC, with more than $16 billion in value (a portion reportedly confiscated from the PlusToken scam). This figure is, however, contested by Bitcoin investment firm River, which suggests a meager 15,000 BTC, valued at approximately $1.4 billion. Understanding the government’s holdings is further complicated in the PlusToken Bitcoin speculation, where some analysts believe China may have liquidated a sizeable chunk. Conflicting data even places China’s Bitcoin holdings anywhere from the second largest to the fourteenth globally.
Blueprint: Hong Kong’s Embrace of Crypto?
While the mainland of China holds a strict position against cryptocurrency trading, Hong Kong, as a special administrative region of China, seems to be on the proactive side of trying to establish the area as a global cryptocurrency hub. Other signs showing that the region is aiming to become a crypto epicenter include the approval of a number of spot Bitcoin and Ethereum exchange-traded funds (ETFs) and licenses granted to a number of cryptocurrency exchanges, which signifies a move towards greater acceptance within China.
Considerations of Hong Kong (and crypto) movements and activities under the umbrella of China’s policies have always evoked varying opinions. While examining the cryptocurrency landscape, one may put open question marks on whether the mainland would actively embrace Hong Kong’s moves under the tenure of President Trump or strive to further position the United States as a dominant force. Yet, focusing on inequalities during the crypto policies discussion may frame this case as breaches in the policy landscape. The impact of such policies, however, is likely to alter the main policies in place, such as the Chinese policy toward cryptocurrency and absorbing a global market where insufficient currencies would most plausibly trigger unprecedented streams of adoption rate shifts.
