China’s former finance minister, Zhu Guangyao, has asked the country to reevaluate the crypto ban that exists in the country further, calling digital assets a ‘crucial aspect for the development of the entire digital economy.’ Zhu said a study was necessary because of ongoing global changes and policy adjustments surrounding digital economy developments.
Speaking at the 2024 Tsinghua Wudaokou Chief Economists Forum, Zhu asked China to tread cautiously regarding cryptocurrency development. The former government official stated that while there were challenges associated with cryptocurrencies, there were positive aspects surrounding digital assets that could offer financial stability. Urging the need for ongoing crypto research, Zhu pointed at US Republican Candidate Donald Trump’s position on crypto as evidence of the need for Beijing to reevaluate the crypto ban. Speaking at the Bitcoin Conference in Nashville in July, Trump reiterated the importance of his country embracing crypto fully before China did it. Zhu stated:
“We must also study the latest international developments and policy adjustments, particularly the influence of U.S. bipartisan policies, as this is a crucial aspect for the development of the entire digital economy.”
The balance between Rewards and Risks
Commenting on the changing crypto regulation landscape, Zhu noted that just like the steel industry was 100 years ago, cryptocurrencies were in their infancy and that one day they could probably overtake gold. He also pointed out the fact that the US Securities and Exchange Commission (SEC) has softened its stance and eventually permitted Bitcoin and Ether Exchange Traded Funds (ETFs) despite opposing them initially. According to the retired official, mainland China needs to reconsider its cautious approach and reevaluate the crypto ban, considering that its semi-autonomous neighbour Hong Kong embraced crypto and has also listed Bitcoin and Ether ETFs.
Zhu called for Beijing to study the shifting crypto regulation landscape further so the country could figure out a way to create a balance between the risks and rewards associated with cryptocurrencies. The former minister said he was cognizant of traditional negative concerns like association with money laundering and financing terrorism that have been tied to crypto, stating that such risks could still be addressed to enable the country to reevaluate the crypto ban. While China may have banned Bitcoin mining and trading, records show that the country still holds the pole position in the Bitcoin mining landscape. Available data shows that Beijing-based Bitcoin miners control at least 55% of the mining market share.
Dynamic Crypto Regulation Landscape
China’s Supreme People’s Court, the People’s Bank of China and other central government authorities issued a blanket ban on crypto mining and trading activities in mainland China in September 2021. The ban prevented Chinese-based companies on the mainland from providing crypto exchange and mining services to residents as they were all deemed illegal. While most crypto services ceased and companies relocated abroad, some investors have still found ways to go around the rules and conduct crypto trading.
All over the world, political leaders seem to have noticed the emerging dynamic crypto regulation landscape, meaning that China would have to reevaluate the crypto ban to avoid being left behind seriously. First of the stalls is US Republican Presidential candidate Donald Trump, who has been upfront with many pro-crypto activities and policy pronouncements. Trump hasn’t been shy about stressing the need for his country to conduct more crypto research to prevent China from taking the lead and dominating the space. After many months of sitting on the fence, the Democratic Party Presidential candidate Kamal Harris seems to have changed her stance and is also seen to support digital innovation including cryptocurrencies.
Danger of Financial Isolation
Many more experts now believe it’s time for China to reevaluate the crypto ban, which led many businesses to shift their bases to the United States and other countries they felt supported the impending digital migration. There’s now real fear that if the pro-crypto Donald Trump won the upcoming US elections, he could go on to solidify his country’s position as a supporter of technological developments and further cause China to face financial isolation and probably be ejected from the SWIFT financial messaging system. It remains to be seen whether Beijing will embrace the ongoing crypto regulation landscape and eventually revalue the crypto ban, and become a part of the nascent crypto sector.
