Despite half a dozen bans on cryptocurrency-related activities, there was one thing that was never banned: owning them.
China would not be China if there were no ways to circumvent the strict regulations. Ownership of cryptocurrencies remains legal and legally protected. Most in the West greatly underestimate the flexibility of the Chinese system, whose employers are masters of the gray area.
Wait a minute, hasn’t China banned everything related to cryptocurrencies? Well yes and no. The government has banned all services related to cryptocurrencies, for example, trading platforms, promotion or sale, and even cryptocurrency mining.
After China has long been the largest and most vibrant crypto market in the world, today, an entire industry has seemingly disappeared. However, China would not be China if it did not have ways to evade the strict regulations.
Ban on Cryptocurrencies in China
Despite half a dozen bans on cryptocurrency-related activities, the government has never banned one thing: owning cryptocurrency.
Surprisingly enough, owning Bitcoin (or any other cryptocurrency) is still legal and legally protected in China.
And if you can legally own something, then you also have the right to sell it to someone else. After all, it is legal property and everyone can decide for themselves what to do with it. You are only in legal trouble if you are trying to set up professional cryptocurrency trading.
Holding on to property rights may surprise some. The Chinese government views private cryptocurrencies largely as a means of money laundering, tax evasion, and illegal fundraising.
However, this is not surprising for those who know China well. The system is ambiguous.
China and Cryptocurrencies: A History of Misunderstandings
China is the only country in the world that has managed to remain officially communist while operating a hyper-capitalist economy. Likewise, the country has managed to be the largest economy with the strictest regulation towards cryptocurrencies, and at the same time be one of the most active crypto markets.
That may seem contradictory, but contradictions are exactly what the Chinese economy lives on. They make a naturally rigid bureaucratic system incredibly flexible.
The reasons why cryptocurrencies are so popular in China are obvious: a repressive government, strict capital controls, and massive state surveillance. All of this drives demand for immutable, privacy-focused, and freely transferable assets, with the idea of creating wealth for its citizens.
However, the main goal of the government has always been to maintain control, while remaining open to new and promising technologies.
As Kai von Carnap, an analyst at Europe’s largest China think tank, explains:
“The government is happy to receive all the ‘free’ expertise in cryptocurrency and Blockchain-related areas, while keeping its large number of engineers busy. In fact, someone programming on Ethereum today might as well switch to government initiatives like China’s BSN (Blockchain Service Network) or writing smart contracts for e-CNY.”
The law in China is not there for citizens to always follow to the letter, they see it as an instrument in the hands of the government. It’s often only used when something gets out of control. In practice, local authorities often turn a blind eye.
In conclusion, Chinese entrepreneurs are masters of the gray area, long been used on the border with legality, since all private business in China was illegal until the beginning of the reform period.
By Audy Castaneda
