China wouldn’t be China if there were no ways to circumvent strict regulations. Ownership of cryptocurrencies is still legal and legally protected. A majority in the West greatly underestimates the resilience of the Chinese system. Chinese businessmen are the masters of the gray area.
Wait a minute – isn’t China banning everything related to cryptocurrency now? Well, yes and no. The government has banned all services related to cryptocurrency, for example, trading platforms, promoting or selling, and even cryptocurrency mining.
After China has long been the largest and most vibrant crypto market in the world, today an entire industry seems to have disappeared. Apparently, however, is the key word here. Because China wouldn’t be China if there were no ways to circumvent strict regulations.
Despite the ban on cryptocurrency-related activities, the government has never prevented one thing from actually owning cryptocurrencies.
And if you can legally own something, 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 will only face legal problems if you try to set up a professional cryptocurrency trade.
Holding on to property rights may surprise some. Finally, the Chinese government sees largely private cryptocurrencies 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 an overly capitalist economy. Similarly, the country has managed to be the largest economy with stricter regulation of cryptocurrencies and at the same time one of the most active crypto markets.
This may seem contradictory, but Contradictions are exactly what the Chinese economy is experiencing. They make a naturally rigid bureaucracy incredibly resilient.
The reasons why cryptocurrencies are so popular in China are clear: repressive government, strict capital controls, and extensive government oversight. All of this is driving the demand for privacy-focused and freely transferable fixed assets.
A Chinese friend who was a former Bitcoin-Miner a long time ago told me:
The Chinese buy cryptocurrencies because there is no other way to protect our assets. Everyone also knows that the stock market in China is manipulated and inefficient, and that real estate prices are already very high. Otherwise, how can we invest and hope to create a fortune for ourselves? “
but, Creating wealth for its citizens is certainly not the main reason Why does China have (semi) long-tolerant cryptocurrencies? The main goal of the government has always been To stay in control while still being open to promising new technologies. As Kai von Karnap, an analyst at Europe’s largest think-tank in China, explains: “The government is happy to receive all the ‘free’ expertise in the crypto and blockchain-related fields, while keeping its huge number of engineers busy.” Indeed, someone programmed to Ethereum Today it may also turn to government initiatives such as China’s BSN (Blockchain Service Network) or writing e-CNY smart contracts.
Systematic discrepancy: 50 degrees of gray area
This means that cryptocurrencies in China have never had a chance to be legalized. But it also means There is no reason for the government to ban them completely. Instead, the authorities have chosen an approach of repeated repression to keep the masses of the population away from such undesirable activities. At the same time, it allows some people to play as long as they are not involved in fraudulent or money laundering activities.
This approach to new technologies and economics, in general, has a discipline and is surprisingly non-ideological. This is what most people who look at China from the outside do not understand.
Since we come from constitutional societies in which the constitution clearly defines what is allowed and what is not allowed, Much of the West greatly underestimates the flexibility of the Chinese system. You see a few Beijing bureaucrats enact strict regulations and take them seriously. However, the actual implementation is often quite a different matter.
The law in China is not there for citizens to always follow to the letter, they see it as a tool in the hands of the government. It’s often only used when something gets out of hand. In practice, local authorities often turn a blind eye. From the outside, this seems somewhat arbitrary, but there is plenty of room for entrepreneurs who are familiar with the system. And one thing is for sure: Chinese entrepreneurs are the masters of the gray area.
They have long been accustomed to operating at the border of legality, after all, all private business in China was illegal until the beginning of the reform period.
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