The Chinese government is skeptical and wary of anything that transcends the party’s existence and work. Thus, the cryptocurrency came under a number of prohibitions and restrictions. Despite this fact, the country occupies a leading position in the global cryptocurrency market. The state authorities of China adhere to an innovative course, but any willfulness and financial rule of the people are prohibited. Communism and the head of the country govern all spheres. The government is committed to the idea of creating a common and accessible digital market system to meet the new needs of the population.
The management of the People’s Bank of China is of the opinion that stablecoins of private firms require more strict supervision, compared to the main cryptocurrency. At the Boao Asian Forum, the government recognized the importance of cryptocurrencies in China. The governor of the PBOC said that crypto assets should be classified as investment tools, since cryptocurrency can become an alternative product for investment.
The Chinese government is considering stricter regulation of cryptocurrencies issued by private companies, such as stablecoins. The probability of making changes in the process of regulating the cryptocurrency market is being studied. But, in my opinion, the plans do not include the possibility of lifting the existing bans on the cryptocurrency.
In 2021, there are prohibitive measures regarding the implementation of the initial placement of tokens on the territory of the state. The Chinese government threatens to block the licenses of websites that are engaged in such transactions. At the moment, the cryptocurrency refers to digital goods, and, therefore, its use as a means of payment is prohibited.
China became the first state to adopt a full-fledged law on cryptography. Thus, the country was able to effectively solve the issues of legal regulation in this area. In general, China has not introduced specific laws for Bitcoin, but has created outright bans. At this stage, in the policy of regulating cryptocurrency in China, digital currency is not considered as an alternative to fiat money.
In my opinion, China is preparing for the full-scale introduction of cryptocurrency in the field of the state economy in the future. The People’s Bank has developed a legislative framework for legalizing the digital yuan. The country plans to introduce a complete ban on competing cryptocurrency, regardless of the issuer. At the end of 2020, the new rules will be approved by the legislators. As a result, a transparent financial market can be created in China, where there will be no place for other digital currencies, in order to avoid problems with the regulation of the money supply.
Restrictions and taxes related to cryptocurrency
In Beijing, the Arbitration Commission imposed a ban on such actions:
- exchange of bitcoins for fiat money through cryptocurrency exchanges;
- sale of cryptocurrency for the state currency.
Thus, as long as the cryptocurrency is not used as a means of payment, everything is within the legal framework. The Central Bank provided such instructions: no company or person can engage in the production or sale of tokens and digital currencies for the purpose of replacing them with yuan. The activities of cryptocurrency exchanges were also outlawed in China. Such harsh measures became digital communism and designated the only legal currency on a par with only the digital yuan, which can be equated with a physical banknote.