The Chinese government has been cracking down on cryptocurrency since late 2017, and it doesn’t seem like their stance will change anytime soon. They see digital currencies as a threat to the financial system, as it allows non-state actors to have too much power. There is also concern about capital outflows and money laundering. As a result, there are many rumors circulating, but there is no evidence to suggest that China is relaxing its ban on digital assets.
There is a common misconception that China is interested in Web3 and will therefore ease restrictions on cryptocurrency. However, this is not the case. China is focused on developing its own Web3 ecosystem for industries like energy, legal, and trade finance. In late December, the Ministry of Science and Technology announced plans to release a Web3 strategy document to promote innovation and strengthen talent in the industry.
Despite denying legal-tender status for cryptocurrencies, China has not outlawed them as property or commodities. This means that the government has the right to tax relevant transactions, as explained by Beijing-based lawyer Guo Zhihao.
There is also speculation that Hong Kong, with its more aligned financial system, could become a crypto hub for the region. However, it is unlikely that the mainland will follow suit in the near future. China is heavily invested in its digital financial technology, and the introduction of the digital renminbi further solidifies the government’s control over the financial system. Hong Kong may become a crypto hub for the region, but it is unlikely that the mainland will relax its ban on decentralized digital currencies.