The unprovoked rise of cryptocurrencies has pushed the Chinese Government to cautious policymaking in this regard, with the aim of striking a balance between encouraging innovation and preventing rampant conjecture. In China, the primary regulatory body monitoring and policing cryptocurrencies is the central bank, the People’s Bank of China (PBOC).
The China Banking and Insurance Regulatory Commission (CBIRC) has stated that only the sovereign cryptocurrency shall be deemed as a legitimate digital currency issued by the PBOC that has a value as a fiat currency and can be used as a medium of exchange but the non sovereign cryptocurrency shall not be regarded as currency but a virtual commodity.
In 2013 and 2017, the PBOC circulars emphasized that Bitcoin shall not serve as a fiat currency and all initial coin offerings (ICO) shall be treated as illegal financing activities due to it not being issued by the monetary authorities and not possessing the legal status to be used and accepted. “To prevent financial risks, China will step up measures to remove any onshore or offshore platforms related to virtual currency trading or ICOs,” said an article published by Financial News, a publication affiliated to the PBOC.
The act of issuing illegal securities is proscribed in the Securities Law of China and violators will receive administrative penalties from the China Securities Regulatory Commission (CSRC). In case of fundraising through an illegal ICO, it will attract civil as well as criminal liabilities.
The Cyberspace Administration of China (CAC) has introduced new regulations for blockchain firms that are operating in the country. The document describes the firms that are subject to regulations as websites or mobile apps that provide information and technical support to the public using blockchain technologies.
The guidelines require blockchain startups to allow authorities access to stored data and to introduce registry procedures that would require ID card or mobile numbers from its users. Moreover, they will be obliged to oversee content and censor information that is prohibited under current Chinese law.
The country has upheld a de facto ban on domestic crypto trading since 2017, which was completed in February 2018 when the government added international crypto exchanges and initial coin offering (ICO) websites to its Great Firewall. The decision was approved by the People’s Bank of China, the country’s central bank, and regulators but as a virtual commodity, there are no specific or explicit restrictions on the acquisition, ownership or trading of the cryptocurrency by individuals.