The People’s Republic of China has been making headlines in the crypto space for its strict outlook on the crypto ecosystem, especially regarding the blanket on the trading of cryptos. However, despite the ban the state hasn’t criminalized owning bitcoin.
According to Sa Xiao, a Council Member at the Bank of China’s Law Research Association, it is legal for individuals to own bitcoin in China. As per CnLedger, a local recognized crypto news source, Xiao even considers the occasional exchange of bitcoins between individuals as legal.
Owning bitcoin has been deemed legal because it is considered property or a commodity of value in many major markets. Similarly, occasional peer-to-peer (P2P) trading, as per Xiao, could be recognized as one of the rights of ownership and may not be punishable by law.
Xiao’s views are grounded in the current legal framework of the country which protects people’s rights to owning virtual properties, including cryptocurrency as bitcoin. According to the CnLedger:
Occasional P2P tradings of bitcoin are in nature ‘disposition right’, one of the rights of ‘ownership’. Therefore owning & occasional P2P trading is legal.
China has harbored skepticism about cryptocurrencies for quite some time now. The start of this troubled relationship can be charted back to 2013 when the People’s Bank of China (PBoC) noticed that the coin was gaining popularity in the country. Later that year in December, the watchdog along with five other government bodies issued an official announcement, titled “Notice on Preventing Financial Risk of Bitcoin”.
In that announcement, they identified and explained several factors in order to provide a warning to the investors. One of the most emphasized factors was low safety due to the lack of a centralized entity behind the currency.
Following that all the banks and financial organizations in the country were prohibited to facilitate and carry out any crypto-related operations. Furthermore, companies offering any bitcoin-related service were obliged to register with the relevant authorities and to strictly follow the know-your-customer (KYC) procedures in order to prevent incidents of money laundering or tax evasion.
In 2017, Chinese regulators launched a crackdown on individuals and firms who were raising funds through initial coin offerings (ICOs) and deemed them as illegal activity. This move was aimed at protecting investors and ‘dealing with risks properly’, obviously referring to the risks that accompany ICOs.
There was an ICO boom during this time period and while there were legit ICOs undoubtedly, but a fair share of companies were jumping on the bandwagon because it was largely an unregulated space, and thus an easy way to raise cash. Hence, it’s no surprise that the risk-averse China decided to impose a ban on this type of fundraising before it “disrupts their social order”, as the central bank said.
Furthermore, the state also ordered the cryptocurrency exchanges to shut down, particularly those offering to trade cryptocurrencies for fiats. As a result, over 15 players, including the three largest exchanges — OkCoin, Huobi and BTCChina — had to cease their local businesses.
Later in 2018, there was another restrictive move on crypto as the state banned peer-to-peer (P2P) platforms and over-the-counter deals. Later on, offshore cryptocurrency exchanges and foreign ICO websites were added to the Great Firewall.
China serves as a home for a vast majority of cryptocurrency miners, even so the local mining industry has been a target of suppression. According to reports, the Chinese government in 2018 pushed crypto miners to make an “orderly exit” from the industry due to tax issues and mining being generally dangerous for the environment.
Moreover, the country’s top internet-finance regulator, the Leading Group of Internet Financial Risks Remediation, ordered local authorities to use all available options, such as “measures linked to electricity prices, land use, tax, and environmental protection”, in order to force miners to shut down their business.
Recently, an agency under the Chinese government purportedly suggested a complete ban on bitcoin mining, possibly in an attempt to restructure the crypto market in country’s favor.
Since China dominates the bitcoin mining industry, both in terms of the actual mining of BTC as well as manufacturing the rigs that support the activity elsewhere, the entire crypto industry took to Twitter following the breaking news.
Of course, China fears bring out the trolls. Let's be clear: China banning PoW mining doesn't mean they are banning rig manufacture. It doesn't mean the end of Bitcoin. You'd think that maximalist trolls would have higher confidence and thicker skin.
— Emin Gün Sirer (@el33th4xor) April 9, 2019
Some are even calling it nothing more than a FUD.
— WhalePanda (@WhalePanda) April 9, 2019
While the latest news of owning bitcoin being legal in the country might be surprising but there are no signs that China intends to ease its pressure on the crypto sector as of now.