Cryptocurrency ban in China: why and until when?

Why such a ban?

The country has had a hostile relationship with the crypto industry since 2013, when it rolled out its first round of restrictions on cryptocurrencies.

According to the statement issued at the time by the People's Bank of China (PBoC), bitcoin was considered a "special virtual commodity" and therefore did not have the necessary legal support to function as a currency. Specifically, the ban was imposed because the digital currency was not supported by any nation or central authority.

The PBoC had also indicated that bitcoin was a potential outlet for money laundering. Although the regulator did not prevent individuals from trading bitcoins, it had advised those affected to be wary of the risks involved.

Is it possible to lift the ban?

On October 24, 2021, two Chinese national institutions issued 2 communiqués, including one announcing that all cryptocurrency transactions are now illegal and that all companies providing cryptocurrency trading services to Chinese citizens are engaged in illicit financial activities .

This time, China is no longer joking. The fight against cryptocurrency had started years ago, but now the new restrictions are strict, and even scare many Chinese traders. A lifting of the ban is therefore very unlikely, at least for the next 5-10 years.

How some manage to circumvent this ban

China's campaign against cryptocurrencies has led the authorities to close the "mining" operations of bitcoins in May. This coincided with the rise of decentralized finance, which allows users to exchange between them without an intermediary , such as a bank or broker, and makes blocking more difficult.

"I continue to trade cryptocurrencies on a regular basis" , said a Chinese investor with an overseas bank account. "How can the authorities arrest me when the industry has developed to escape centralized control?" .

Deng Jianpeng, the director of the finance research center even announced: "Most of the exchanges will stop because of the ban. But there will always be people who will try to find new investment paths , such as using a platform abroad or through decentralized exchanges.