Bitrabo Editorial
As talks about cryptocurrency regulations grow, a past high-ranking official from China’s Ministry of Finance has suggested that the government rethink its strict prohibition on digital assets.
In a recent economic forum in Beijing, Zhu Guangyao, who served as vice minister from 2010 to 2018, stressed the significance of cryptocurrencies for China’s digital economy, according to a report by the South China Morning Post here.
Revisiting the Crypto Ban
Zhu’s comments arise as the United States has notably shifted its stance on cryptocurrency, instigating calls in China for a similar reassessment.
He acknowledged that while cryptocurrencies bear some risks—like market instability and possible illegal use—they are also vital for the progression of the digital economy.
Back in 2017, China imposed a ban on initial coin offerings (ICOs) and shut down crypto exchanges, which was escalated in 2021 when Bitcoin (BTC) mining was forbidden, and crypto businesses were declared illegal.
The central reason for these moves focuses on maintaining financial stability and preventing the use of cryptocurrencies in criminal enterprises, including money laundering and terrorism.
However, Zhu argued that instead of outright bans, regulating these assets could effectively address the associated risks. He remarked, “Our current gap [with the US] is that we don’t participate,” alluding to the underground trading still occurring outside government scrutiny despite bans.
International Perspectives on Crypto
While China holds onto its stringent regulations, Hong Kong is charting a contrasting course by developing its cryptocurrency market to become a global digital asset center, under a separate legal framework supported by Beijing.
This difference is evident from the recent launch of the crypto exchange-traded funds (ETFs) market that directly invests in leading cryptocurrencies like Bitcoin and Ethereum (ETH).
The evolving global market dynamics have attracted the attention of US politicians, notably former President Donald Trump, who has emphasized the necessity for the US to adopt digital assets to prevent China from gaining an upper hand.
In a similar vein, Kamala Harris, the Democratic presidential candidate, has recently voiced her support for innovative technology, including digital assets, advocating for their proper regulation to foster growth in this sector.
Prominent academic Wang Yang has also criticized China’s cryptocurrency mining ban, labeling it “very unwise,” as it has transferred business prospects to the US. He cautioned that should Trump return to the presidency, China might face heightened “financial isolation,” potentially losing access to the SWIFT financial messaging system.
Furthermore, economist Huang Yiping, a former member of the People’s Bank of China’s monetary policy committee, has raised concerns regarding the long-term viability of the cryptocurrency ban, suggesting it might impede China’s ability to leverage blockchain technology and other innovations.
It remains uncertain whether the Chinese government will adopt a new regulatory approach to lead in the digital asset arena or stick with its current policy, particularly as this emerging sector becomes increasingly significant to the global economy.
Image provided by DALL-E, chart from TradingView.com