As the crypto industry continues to thrive, with rising prices and signs of growing adoption, officials in China are considering lifting the country’s ban on cryptocurrencies to keep the Chinese economy competitive.
Huang Yiping, a former adviser to the People’s Bank of China (PBOC), China’s central bank, has called on the Chinese government to review its strict restrictions on cryptocurrency trading. In a speech in December 2022, he expressed concern about the future of digital currencies in China, according to a report by the South China Morning Post on January 29.
Huang argued that a prolonged ban on crypto assets could lead to lost opportunities in technologies like Blockchain that are valuable to regulated financial systems.
Banning crypto currencies may be feasible in the short term, but the question of whether or not it is viable in the long run demands an in-depth investigation.”
Meanwhile, Huang is in favor of repealing the ban on crypto space. He also emphasized the importance of developing an appropriate regulatory framework for the emerging digital class, although he acknowledged that this would not be easy.
“There is no particularly good way to ensure stability and function as to how cryptocurrencies should be regulated, especially for a developing country, but ultimately an effective approach may still need to be found.”
Along with indicating the advantages of crypto for China, Huang also noted that cryptocurrencies like Bitcoin contain many risks. He pointed out that since bitcoin has no intrinsic value, it is more like a digital asset than a traditional currency. Also, it has been caught in many transactions involving illegal activities.
From 2015 to 2018, Huang served as a member of the Monetary Policy Committee of the People’s Bank of China. He is now working as a professor of economics and finance at Peking University’s National School of Development.
Crypto Surges Despite Ban In China
Cryptocurrency trading has been officially banned in China since 2019 but continued through 2021 via foreign crypto exchanges. On September 24, 2021, 10 government authorities, including the PBoC, jointly issued a notice outlawing crypto-related activities. After the announcement of the crypto-ban, the price of Bitcoin fell to over $2,000 in that period.
Despite the government’s strict measures, many cryptocurrency investors are still in China. According to blockchain analytics firm Chainalysis, China re-entered the top 10 countries with the highest crypto adoption last year, moving up from 13th in 2021.
Despite the country’s ban on crypto trading, failed crypto exchange FTX had 8% of Chinese clients, according to official data.
Additionally, China used to be the world’s largest Bitcoin mining country, with over 75% BTC hash rate power in 2019. In July and August 2021, this percentage dropped to zero after the shutdown of several crypto-mining farms in the country. While in September 2021, the hash rate share increased to 22.3%, ignoring the ban.
China became the second largest provider of Bitcoin hash rate in January 2022, when Bitcoin miners in China accounted for about 20% of the global BTC mining hash rate, according to the Cambridge Centre for Alternative Finance (CCAF).
The CCAF explained:
“This strongly suggests that significant underground mining activity has formed in the country”. The center added, “As the ban has set in and time has passed, it appears that underground miners have grown more confident and seem content with the protection offered by local proxy services.