In February 2018, a joint effort by PBOC and the Ministry of Industry and Information Technology revealed plans to expand crypto exchange regulations to foreign exchanges, banning access both to offshore platforms and to ICO (Initial coin offerings) websites. Through the Institute of International Finance, the Chinese government has also expressed support for the implementation of a global regulatory framework for cryptocurrencies.
Exchange platforms that traded cryptocurrencies or provided facilitation services were also ordered to be closed following the crackdown on ICOs. Control of financial risks and stabilization of the financial system has become the top priority of People’s Bank of China.
According to The Guardian “The cryptocurrency sector has been under heavy scrutiny in China since 2017, when regulators started to ban initial coin offerings and shut local cryptocurrency trading exchanges. China also began to limit cryptocurrency mining, forcing many firms – among them some of the world’s largest – to find bases elsewhere.”
The Legality of Bitcoin in China
In 2017, the Internet Finance Association of China issued a warning about the risks of investing in cryptocurrencies. While investors are permitted to speculate on cryptocurrency, the agency highlighted that the different crypto exchanges in the nation were not legally established.
“The National Development and Reform Commission’s (NDRC) move is in line overall with China’s desire to control different layers of the rapidly growing crypto industry, and does not yet signal a major shift in policy,” said Jehan Chu, managing partner at blockchain investment firm Kenetic.
Restrictions on Cryptocurrency in China–
Chinese cryptocurrency laws are pretty strict. Financial institutions are banned from using Bitcoin for trading and ICOs are also illegal to conduct in China. Chinese Bitcoin exchanges were suggested to stop operations within the domestic market, until licenses would be established for them. While some cryptocurrencies are legitimate, many have turned out to be scams, leaving investors out of pocket by millions of dollars. Many threat actors and fraudsters are also operating malicious websites masquerading as legitimate cryptocurrency exchanges.
According to a report from the South China Morning Post, the rules come by way of amendments to its guidance for adjustments to the nation’s industrial structure, including categories that are encouraged, restricted, and eliminated. These regulatory actions by China are aimed at controlling the increasing mania involving decentralized, non-regulated cryptocurrencies which have recently soared to astronomical valuations.