These Regulatory Changes Suggest China Will Lift Its Crypto Ban

In a surprising turn of events, China has started sending signals that it may reconsider its crypto ban. Hence, this gives hope for a potentially lucrative crypto market in the future.

Current regulatory developments in Hong Kong and technological advancements in mainland China suggest that the crypto ban may finally be lifted.

A Brief History of China’s Crypto Ban

China’s relationship with the cryptocurrency industry has been tumultuous since 2013, when the country first imposed tough restrictions. The first ban came in December of the same year when the People’s Bank of China (PBoC) and other financial watchdogs banned banks from processing Bitcoin-related transactions.

Bitcoin was considered a “special virtual commodity”. Regulators argued that it lacked the legal basis to operate as a currency. Therefore, it was seen as a potential outlet for money laundering.

Banning and regulating crypto around the world
Crypto Prohibition and regulation in the world. Source: Statista

In 2017, China took further steps to prevent money from leaving the country illegally. In January of the same year, the PBoC launched an investigation against crypto exchanges, focusing on forex management and anti-money laundering.

The findings led to the decision to ban initial coin offerings (ICOs) in September. Subsequently, the PBoC ordered that capital raised through ICOs be returned to investors.

It also banned financial institutions and non-bank payment companies from providing services aimed at token-based fundraising activities and issued a directive requiring crypto exchanges to voluntarily shut down.

The crackdown continued in subsequent years, focusing on Bitcoin mining in 2019. The National Development and Reform Commission (NDRC) has labeled it an “undesirable” industry due to its impact on the environment.

This classification caused panic, as a significant percentage of Bitcoin mining rigs are made in China, and more than half of the world’s Bitcoin mining power was located there.

Bitcoin Energy Consumption
Bitcoin energy consumption. Source: Statista

In 2020, the government blocked more than 100 foreign websites offering crypto exchange services. This series of restrictions culminated in 2021, when China completely banned crypto trading and mining. He cited the energy-intensive nature of Bitcoin and the threat to the country’s environmental goals.

Bitcoin miners have been forced to shut down or relocate to other crypto-friendly countries, which has had a significant impact on the global crypto economy.

A green light for crypto thanks to regulation

China now appears to be subtly changing its stance on cryptocurrency. Hong Kong, a city that has traditionally acted as China’s sandbox, is forging ahead with new regulations suggesting the crypto ban could finally be lifted.

Indeed, the Hong Kong Monetary Authority (HKMA) is making substantial progress in developing a regulatory framework for crypto pegged to traditional financial assets, known as stablecoins.

HKMA’s announcement of a stablecoin regulatory regime by 2024 is an important development. Especially for a region that has traditionally taken a contrary approach to mainland China, where cryptocurrency trading remains illegal.

Approach to crypto adoption
Approach to crypto adoption. Source: Statista

Amid growing uncertainty and regulatory challenges in the United States, the crypto community around the world applauds Hong Kong’s moves to clarify policy for the new asset class.

“Much of Chinese capital is looking for smarter and safer ways to invest[and]being in Hong Kong naturally makes more sense than anywhere else,” said BTSE Managing Director Henry Liu.

Recently, Hong Kong also introduced a new crypto regulatory regime requiring exchanges to be licensed. It aims to pave the way for retail investors to trade cryptocurrencies like Bitcoin and Ethereum. Even Hong Kong Legislative Council member Johnny Ng has invited crypto exchanges including Coinbase to apply and register in the region.

“I hereby extend an invitation to welcome all global virtual asset trading operators, including Coinbase, to come to HK for the application of official trading platforms and new development plans,” said Ng.

Largest Crypto Exchanges
The largest crypto exchanges. Source: Statista

As the U.S. Securities and Exchange Commission (SEC) cracks down on crypto exchanges, this invitation signals that Hong Kong is ready to embrace crypto firms aimed at serving retail customers in the country.

Embracing Blockchain Technology and Web3

In addition, BOCI, a Chinese financial institution, recently issued CNH 200 million in digitally structured notes. It marked its first issuance of token securities in Hong Kong.

The operation was initiated by UBS and entrusted to its clients in Asia-Pacific. Subsequently, presenting new steps in the applicable legislation and types of blockchain. It also meant the successful introduction of regulated securities into a public blockchain.

“We are driving the simplification of digital asset markets and products, for Asia-Pacific clients through the development of blockchain-based digital structured products…We are encouraged by the evolving digital economy of Hong Kong and we are committed to promoting the digital transformation and innovation development of Hong Kong’s financial sector,” said Ying Wang, Deputy General Manager of BOC.

While Hong Kong’s welcoming stance and regulatory developments are commendable, the buzz around the lifting of China’s crypto ban is not simply a byproduct of these advancements.

Beijing released a white paper on innovation and development of Internet 3.0 in mainland China. It included blockchain technology as a key infrastructure, highlighting a potential shift in China’s crypto stance.

The planned annual investment of Chaoyang District is at least 100 million yuan. The goal of supporting the construction of the Internet 3.0 industrial ecosystem further points to a more crypto-friendly future.

Policy Changes Indicate Lifting of Crypto Ban

It is crucial to remember that lifting a crypto ban as large as China’s will require more than just regulatory change.

This will involve a complete overhaul of the ecosystem, including enhanced security measures for asset custody, strict cybersecurity standards and improved due diligence practices. The Hong Kong Securities and Futures Commission’s (SFC) plans to allow licensed platforms to serve retail investors under specific guidelines indicate the meticulousness required.

Crypto Market Cap
Crypto market capitalization. Source: Statista

These developments point to a possible relaxation of the long-standing crypto ban in China. The road to a complete facelift remains long and complex. Still, these are promising signs for crypto enthusiasts and investors alike.

The crypto market is waiting in anticipation for a potential game changer from the East. Especially now that Hong Kong and Mainland China continue to refine their regulatory frameworks and embrace technological innovation.


Following the guidelines of the Project Trust, this feature article presents the opinions and views of experts or individuals in the industry. BeInCrypto is dedicated to transparent reporting, but the opinions expressed in this article do not necessarily reflect those of BeInCrypto or its staff. Readers should independently verify the information and seek professional advice before making any decisions based on this content.

Leave a Comment