By Jimmy Pierce
Over the past two decades, China has become an economic powerhouse, with its GDP soaring from $1.211 trillion in 2000 to $14.723 trillion in 2020.[1] China’s increase in economic prosperity has coincided with a newfound role on the international stage, and with international projects such as the Belt and Road Initiative[2] and infrastructure investment in Africa,[3] China has shown no intention of stalling on the global front.
While China has been growing, cryptocurrency has also become a significant financial player globally.[4] Cryptocurrency is a form of virtual currency that secures and verifies transactions through cryptography.[5] Cryptocurrencies function as a medium of exchange, existing in an electronic intangible form which can substitute for traditional legal tender.[6]
In 2017, China announced a ban on cryptocurrency trading in exchanges and made financing using cryptocurrencies illegal.[7] Recently, on September 24, 2021, China made a strikingly similar move, announcing all “virtual-currency-related business activities are illegal and should be strictly prohibited and cracked down upon in accordance with the law.”[8] Compared with the 2017 regulations, these are by far “the most direct, most comprehensive regulatory framework involving the largest number of ministries” regarding crypto regulations.[9]
With China’s looming presence over the global economy, what are the implications of this ban on the future of crypto? One possibility is that despite China’s strong stance, the host of crypto players currently located in China will simply rebase offshore.[10] The relocation of businesses and miners may end up economically harming China in the long run, as the country is projected to lose about $6 billion worth of annual crypto mining revenue.[11] Analysts also do not expect the crackdown to dent global crypto prices long term because multinational companies are continuing to adopt crypto products and services.[12] On the other hand, it is possible that, given China’s prominence, other countries follow suit.[13] However, it seems that despite China’s big play, crypto is still here to stay, at least for the time being.
[1] World Bank, GDP (current US$) – China, https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=CN&start=2000 (last visited Oct. 5, 2021).
[2] See Andrew Chatzky & James McBride, China’s Massive Belt and Road Initiative, Council on Foreign Relations (last updated Jan. 28, 2020, 7:00 AM), https://www.cfr.org/backgrounder/chinas-massive-belt-and-road-initiative (“Xi’s vision included creating a vast network of railways, energy pipelines, highways, and streamlined border crossings, both westward—through the mountainous former Soviet republics—and southward, to Pakistan, India, and the rest of Southeast.”).
[3] See Frangton Chiyemura, Chinese firms — and African labor — are building Africa’s infrastructure, The Washington Post (April 2, 2021, 5:00AM), https://www.washingtonpost.com/politics/2021/04/02/chinese-firms-african-labor-are-building-africas-infrastructure/.
[4] Bitcoin’s Price History, Investopedia, https://www.investopedia.com/terms/c/cryptocurrency.asp (last updated Sept. 9, 2021) (explaining how the price of bitcoin has skyrocketed to astronomical levels since its inception in 2008).
[5] Cryptocurrency, Investopedia, https://www.investopedia.com/articles/forex/121815/bitcoins-price-history.asp (last updated Aug. 9, 2021).
[6] Sarah J. Hughes & Stephen T. Middlebrook, Advancing a Framework for Regulating Cryptocurrency Payments Intermediaries, 32 Yale J. Reg 495, 504 (2015).
[7] Gongshang Zongju deng Qibumen Guanyu Fangfan Daibi [Announcement of the People’s Bank of China, the Office of the Central Leading Group for Cyberspace Affairs, the Ministry of Industry and Information Technology and Other Departments on Preventing the Financing Risks of Initial Coin Offerings] (promulgated by People’s Bank of China, the Office of the Central Leading Group for Cyberspace Affairs, the Ministry of Industry and Information Technology etc. Sept. 4, 2017, effective Sept. 4, 2017), art. 1, CLI.4.301348 (Pkulaw).
[8] China to tighten regulation on virtual-currency trading, speculation, Xinhua News Agency (Sept. 24, 2021), http://www.news.cn/english/2021-09/24/c_1310207607.htm.
[9] Alum John & Samuel Shen, China’s top regulators ban crypto trading and mining, sending bitcoin tumbling, Rueters (Sept. 24, 2021), https://www.reuters.com/world/china/china-central-bank-vows-crackdown-cryptocurrency-trading-2021-09-24/.
[10] Ralph Jennings, How China’s Ban on Cryptocurrency Will Ripple Overseas, Voa News (Oct. 2, 2021), https://www.voanews.com/a/how-china-s-ban-on-cryptocurrency-will-ripple-overseas-/6254329.html.
[11] John & Shen, supra note 8.
[12] Id.
[13] See Chloe Orji, Bitcoin ban: These are the countries where crypto is restricted or illegal, EuroNews (Sept. 24, 2021), https://www.euronews.com/next/2021/09/24/bitcoin-ban-these-are-the-countries-where-crypto-is-restricted-or-illegal2 (explaining which countries have strongly regulated or outright restricted cryptocurrencies to date).