Crypto in China

From being one of the most important players in the global cryptocurrency industry to a leading position in mining and trading, changes in the regulatory environment have changed everything. This article elaborates on the current development outline of cryptocurrencies in China, starting from a legal framework to development highlights, and possible future directions.

Historical context and regulatory environment

China was very prompt to recognize the potential of this technology, including digital currencies, but its attitude to this sector has always been pretty vague: on one hand, it actively supported blockchain development and research activities, while on the other hand, it put a number of restrictions on performing certain actions with the already-mentioned cryptocurrencies.

The biggest turning point arrived in 2017 when Chinese authorities banned the ICOs and closed all local cryptocurrency exchanges, which had a massive impact on decreasing trading activity in the country. In 2021, it got even worse: there were newly introduced measures against crypto mining and trading, after which many mining and trading activities moved out of the country.

Current status and main challenges

Since the latest regulations kicked in, the crypto market of China has been facing major challenges. Cryptocurrency mining in the country, once highly successful, came to a near standstill as many miners relocated their operations to friendlier jurisdictions such as the US, Kazakhstan, and Russia. For retail investors and traders, too, opportunities are significantly limited, which has resulted in a decline in innovation within the sector at home.

Future of Cryptocurrencies in China

Yet, despite these harsh regulations, China does not reject blockchain as such. The government actively promotes the creation and implementation of a state-owned digital currency called Digital Yuan, or DCEP, intended to reinforce government control over financial flows and be more efficient in paying systems. Moreover, Chinese companies continue to research commercial applications of blockchain technology in logistics, data management, and smart contracts.

The whole cryptocurrency space is radically changing in China. While strict regulatory policies have suppressed most aspects of the traditional cryptocurrency market, the country continues to apply blockchain for innovating and improving governance in general. In any case, the prospect for cryptocurrencies in China is to continue being so closely linked with government policy. It is unlikely to allow free development in this area, but new opportunities may open at the state level for the very blockchain technology.

Is crypto legal in China?

Chinese policy with regard to one of the leading economies in the world has been very strict. Approaches for regulating cryptocurrencies in China seriously differ from the measures adopted in other countries and emphasize extra caution and control from the side of the state. Let’s look into current legal regulation of cryptocurrencies in China, main points of its evolution, and implications for market participants.

Ban of cryptocurrencies

Regulators of China officially banned Initial Coin Offerings in September 2017, and for the very first time, came down heavy on the cryptocurrency vertical. “The requirement to rein in speculation and defend economic stability” was a reason for such a ban. Further tightening of the regulations followed in the next few years when, in 2021, China went so far as to even ban all open cryptocurrency transactions and mining completely, labeling them illegal. As of the writing time, ownership of cryptocurrencies is not banned in China, but any kind of transactions with their use, trading, and exchanges are banned.

Reasons for ban

Experts point out that the main drive behind such stringent measures from the Chinese authorities lies in the urge to subdue the financial system and manage any kind of financial risk associated with speculation in the crypto market. Besides, China is already working actively on an advanced stage to introduce its digital currency—the digital yuan—which definitely has to require minimal competition from decentralized cryptocurrencies.

Impact on the industry

The bans have wrecked the cryptocurrency landscape in China. The miners were compelled to shift their bases to other countries like the United States, Kazakhstan, and Russia which share the global cryptocurrency mining capacity. Similarly, exchanges such as Binance and Huobi, which had major hubs in China earlier, have shifted their operations overseas.

Prospects and alternatives

Meanwhile, despite the ban, China continues to actively develop and implement blockchain technology in various parts of its economy: in healthcare, logistics, and public administration. Thus, government support for blockchain remains strong, but only strictly limited to controlled and centralised solutions.

The government bans not only trading but also mining and any other kind of cryptocurrency transaction in China. And this condition strongly affects both the local and global cryptocurrency market. The immediate prospects of cryptocurrencies in China are very blurred; at the same time, the country actively continues to develop and implement blockchain technology as part of the relevant government program, placing it among the leaders in this field on a global level.

Crypto adoption in China

Having been one of the technological leaders in the world, China has for a long period of time actively taken part in this industry of cryptocurrency, mainly regarding mining and blockchain technology development. Considering the tight regulatory policies in place, many aspects have been very peculiar regarding the actual situation in this country with regard to cryptocurrencies, and strongly influencing their adoption and use. Following the current condition, this paper reviews some essential regulatory measures and development of technologies that are now happening in China, while trying also to identify its future trends.

China continues to maintain a vital position in the arena of cryptocurrency; however, it reins in its strength with strict government policies and embracing technology. In light of these, close monitoring of the shifting regulatory environments and technological developments in an advanced manner will be better necessary for gauging future trends and opportunities with regard to cryptocurrencies and blockchain technology in China.

Best crypto exchange in China

With the strict regulatory measures laid by the Chinese government for cryptocurrencies, going all the way to ban cryptocurrency exchanges within the country, Chinese users must look elsewhere to participate in the cryptocurrency market. The article below provides an overview of the international cryptocurrency exchanges that stay available to Chinese investors and evaluates these on security, functionality, and usability parameters.

Criteria for Evaluating Exchanges

This requires a number of conditions, all critical in nature, which need detailed consideration. Among these are:

Legal compatibility: The capability of an exchange to service clients from China based on international financial law.

Security: Multilevel security with two-factor authentication, data encryption, and asset insurance.

Accessibility and interface: Support for language settings—including simplified Chinese—and availability of mobile apps.

Variability of trading instruments: Depending on how many cryptocurrencies are available, along with financial instruments like spot trading, futures, and options.

Customer support: Quality of customer service and information resources.

The best cryptocurrency exchanges for Chinese users

Binance: It is the largest cryptocurrency exchange in the world. The classes of cryptocurrencies and trading instruments it offers are very broad. The commission within this exchange is also very low, while the trading platform is powerful and multilingual, supporting Chinese.

Huobi Global: Huobi was founded in China but is now an international company that offers high levels of security and trading option variety. Huobi also focuses on a lot of research and education, making it quite popular with both new and more seasoned traders.

OKEx: Another popular Chinese-owned international exchange, OKEx offers a complete suite of cryptocurrency products, including but not limited to: spot and margin trading, futures, and perpetual swaps. OKEx is also multilingual and among the industry leaders when it comes to providing market analysis tools to its clients.

Best crypto app in China

Selection of a sound and working cryptocurrency mobile app is a task of paramount importance for the consumer who intends to enter the global crypto market in a country like China, with tight regulatory curbs on the use of cryptocurrencies. This article is aimed at giving an idea of the most suitable cryptocurrency apps available for Chinese users based on their needs for security, usability, and service availability.

Criteria for Application Selection

Main points related to selection of crypto app in China are hereby listed below:

• Security and reliability—the application should carry a high level of encryption and data security.
• Accessible and legal compatibility—to be in a position to work with the application despite Chinese regulative restrictions.
• Language support—all interface in Chinese will be good for usability.
• Rich functionality is available: multi-currency, integration with blockchain networks, and extra tools for trading and analysis.

Binance still is considered one of the most popular applications for work with cryptocurrencies in the world market, and thanks to VPN, it is available for the citizens of China too. This digital service provides trading, staking, saving, and exchanging different kinds of cryptocurrencies. It guarantees top-level security by means of multi-factor authentication and regular updates of its software.

Huobi Global: Initiated in China, Huobi is now working on the international market, providing a crypto mobile app in multiple languages including Chinese. Advanced trade options and high support for users make it very popular among them.

• OKEx: OKEx offers a comprehensive cryptocurrency app that supports all major transactions like buying, selling, trading, and storing cryptocurrencies. The application is available in Chinese and is characterised by high speed and reliability in its transactions.

How to access applications via a VPN

The restrictions imposed on the Chinese internet often make users resort to using services of VPNs to reach international cryptocurrency applications, which bypasses geographical and regulative restrictions at the cost of requiring more careful attention to data security and personal information.

For Chinese users who are ready to work with cryptocurrencies, the most important decision will be the choice of a cryptocurrency application. Under such severe regulatory restrictions and technological blockages, security, multilingual support, functionality, and reliability are in the first line when choosing applications. Binance, Huobi Global, and OKEx remain leaders in providing high-quality, secured services for Chinese and international crypto users.

Taxes on Crypto in China

China has one of the most severe regulative policies in terms of cryptocurrencies and also special approaches to taxing income received as a result of activities with cryptocurrency. Despite the complete ban on trading and mining of cryptocurrencies within the country, questions of taxation are still relevant for individuals who, for example, have conducted certain activities abroad with cryptocurrencies or took part in blockchain projects. This article will outline the main features of China’s tax policy regarding cryptocurrencies and the specifics of tax control over related transactions.

Although China enforces strict restrictions on activities related to cryptocurrency, by its tax law, it is mandatory for Chinese taxpayers who run cryptocurrencies in overseas countries to declare and pay taxes accordingly. Understanding tax requirements would avoid violations in law and optimize the tax burdens. The regulatory policies of cryptocurrencies in China may change in the future and could gain more attention from market participants in the future.

How to buy crypto in China

Buying cryptocurrencies is not an easy process in China because the country represents one of the toughest regulatory environments in the world. Of course, in 2017 when the Chinese authorities imposed a ban on crypto exchanges and initial coin offerings, it became much more complicated for residents to buy cryptocurrency legally. However, there are some ways Chinese investors can legally take part in the cryptocurrency market in regard to current legislation.

Legal restrictions

Before weighing your options for buying cryptocurrencies, it would be important to note that any transactions in cryptocurrencies are forbidden on paper within China. Touting, trading, exchanging, buying, selling, and even advertising cryptocurrency products falls under the prohibition, so most of the transactions discussed below are performed with the use of platforms registered and operating outside of China.

Use of foreign exchanges

One of the most available ways to buy and sell cryptocurrencies for Chinese citizens is to create an account on international exchanges that cannot be subjected to Chinese laws. Most of these exchanges are Binance, Huobi Global, and OKEx that have pulled out from the Chinese market but continue to provide services for Chinese users on their international internet sites. Quite often, access to these services requires the use of VPN services to bypass geographical and internet restrictions.

Methods of account replenishment

Being able to trade on international exchanges, one should be able to fund an account. Since direct bank transfers are difficult because of regulatory restrictions, an alternative option can be the use of stable cryptocurrencies—stablecoins, for example, USDT-Tether—that can be bought with the support of systems of payments allowing the handling of cryptocurrency transactions. Thus, Chinese investors easily exchange yuan for stablecoins and then use them for further exchange trading.

Legal compliance

One should note that any cryptocurrency transaction should be carried out with full understanding of associated legal risks. One is advised to check the consistent changes in legislation in order not to violate certain laws, which may attract serious fines or other legal penalties.

Crypto mining in China

Long a world leader in cryptocurrency mining, China had the advantageous combination of inexpensive energy and relevant equipment production. In recent years, all of that dramatically changed.

Changes in regulatory policy

In 2021, China’s government officially banned cryptocurrency mining, motivated by a desire to cut carbon emissions and concerns over financial stability. A ban on mining has had immense repercussions in the global cryptocurrency hardware supply chains and sent the operations of mega miners fleeing out of the country.

Economic impact

Economic devastation in those areas where mining was previously undertaken was quite real. The majority of businesses were forced either to restructure their operations or close entirely. Besides that, the ban contributed to an increase in prices for cryptocurrency apparatus all over the world due to a decrease in its production.

Changes in the Industry Globally

Immediately after the ban, many of those mining companies started searching for refuge in more friendly jurisdictions, such as the United States and Kazakhstan, where governments would grant a more predictable and stable environment to develop cryptocurrency operations. This leads to the geographic redistribution of cryptocurrency mining capacity.

The future of mining in China

At the same time, due to the technological capabilities of China in general for the production of mining equipment and study of blockchain, this country continues to be a participant in this field, even when the activity is banned. Note that Chinese companies and research institutes are actively implementing blockchain technologies in various industries, which in the future may be a signal to relax regulatory policies.

In June, the Chinese government’s ban on mining cryptocurrency shook markets, from local to international. The crypto industry continued developing despite such strict regulative measures, finding its way out of the changing legislation and moving onto more friendly jurisdictions.

Best crypto wallet in China

However, in spite of serious regulatory policy, the cryptocurrency market is active, popular, and in-demand for advanced users and investors. Choosing a reliable cryptocurrency wallet is a critical point of safe cryptocurrency deals. Further on, we will look at the most popular and secure cryptocurrency wallets available in China.

Selection criteria

When you choose a cryptocurrency wallet, you definitely need to pay attention to the following aspects:

Security: multilevel security with two-factor authentication included.

User-friendly interface: intuitive and available for users of all levels.

Currencies supported: A huge number of supported cryptocurrencies and tokens.

Reputation and feedback: positive feedback of users and experts, stable work at the market.

Best Cryptocurrency Wallets in China

What to choose in China depends only on one’s deep review of what is available and how well it meets one’s needs for security, convenience, and functionality. Trust Wallet, MetaMask, and Huobi Wallet are already proven solutions that provide the required level of security and convenience for crypto-transactions in today’s economic landscape.