In recent days and weeks, there have been increasing reports that the People's Republic of China could soon drop its restrictive stance on Bitcoin. Donald Trump fueled speculation regarding a secret pro-Bitcoin stance from Beijing when he emphasized in a Bloomberg interview that China is interested in Bitcoin and is quite progressive in this area - Blocktrainer.de reported.
But is there any substance to this speculation? Roger Huan, an expert on the legal status of Bitcoin in China, has written an article on the subject for Forbes Digital Assets. His conclusion: it is "very unlikely" that the People's Republic will lift the Bitcoin bans in the near future.
Bitcoin and China
With regard to Bitcoin, there are some contradictory reports from China. On the one hand, China is said to have banned Bitcoin and mining in 2021. Nevertheless, around 20 percent of Bitcoin's computing power comes from China and Chinese people are even said to trade large volumes via crypto exchanges.
What makes the situation even more complicated is that Hong Kong takes a completely different approach. The Chinese Special Administrative Region approved Bitcoin and Ethereum spot ETFs for trading in April and has pledged to become a "crypto hub".
Forbes expert Roger Huang, who has written a book on Bitcoin and China, explains that Hong Kong has a completely different system and regulatory authorities, which makes it possible to keep Bitcoin exchanges legal - and it is likely to stay that way.
Hong Kong's constitution, the Basic Law, enshrines protections for Bitcoin trading to some extent. So it is unlikely that Hong Kong will ever ban trading in Bitcoin, as mainland China has done, until there is an amendment to the Basic Law.
Roger Huang
Huang emphasizes that although three subsidiaries of mainland asset managers are involved in the Hong Kong-registered ETFs, Chinese investors are not allowed to invest in the investment products. This was already a foregone conclusion before the start of trading - Blocktrainer.de reported.
The ban on Bitcoin and Co.
Huang explains how restrictive the government's policy towards Bitcoin and cryptocurrencies actually was or is and what consequences this has had.
People have been arrested for trading [the US dollar stablecoin] Tether itself and using virtual currencies (in connection with other offenses). Bitcoin mining is banned, with Bitcoin mining conferences pulled out of mainland China and significant amounts of hashing/mining power. Bitcoin exchanges no longer offer yuan trading in cryptocurrencies and generally ban Chinese IP addresses from accessing their services - and the IP addresses of many foreign exchanges are blocked by the Great Firewall.
The Bitcoin bans in China are actually a series of regulatory notices that escalated year by year to include law enforcement in 2021.
Roger Huang
According to the expert, the fact that Chinese courts declare Bitcoin to be property protected by law does not change this Bitcoin ban.
Ban unlikely to be lifted
The authorities behind the Bitcoin bans and regulations are following decades-old political paths, explains Huang. Lui He, one of President Xi Jinping's most trusted economic advisors, has also issued the aforementioned mining ban.
According to the expert, an opening towards Bitcoin and Co. would either require a drastic turnaround by Beijing or could only take place after the resignation of Xi Jinping, which is expected in 2029 at the earliest.
In general, however, it should always be emphasized that China's communist model is diametrically opposed to the values of Bitcoin. Beijing probably noticed this early on.
China was one of the first countries to recognize the threat to its model posed by Bitcoin.
Roger Huang
The People's Republic is also quite advanced when it comes to the central bank digital currency, which allows the Communist Party to exert greater control over its citizens. With the digital yuan, China has become the first major economy to roll out a Central Bank Digital Currency (CBDC).
In his conclusion, Huang accordingly emphasizes that the Bitcoin headlines about China should be taken with a grain of salt and underlines that Beijing is not expected to make a 180-degree turnaround for the time being.
It's unlikely that the policy path of central bank digital currency proliferation and Bitcoin displacement will reverse - meaning that any headlines coming out of China are unlikely to be indicative of policy changes - though they could be favorable for price sentiment as headlines [...].
Roger Huang
Although Huang says he doesn't believe the People's Republic will lift the "bitcoin ban" anytime soon, he recognizes positive developments that he says could continue - reinforced by the fact that Donald Trump, the next president of the United States, could likely make a strategic bet on the asset to gain an advantage over China.
There have been some notable headlines regarding China, such as that of the Hong Kong professor who thought the ban on Bitcoin mining was a mistake because it increased tax revenues for the United States. It's entirely possible that China will study Bitcoin [...] and that the headlines will continue in that direction, especially with a possible pro-Bitcoin administration under Trump.
Roger Huang
Whether the competition with the US under a Bitcoin-friendly Trump will ultimately force Xi Jinping to change course remains to be seen. For the time being, however, the news situation from the Middle Kingdom makes it unlikely that Beijing will take a pro-Bitcoin stance any time soon.