The Less-Known Facts About China’s Cryptocurrency Law

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.

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3 Reasons Why Foreign Firms Don’t Need to Shut Down China Operations

The escalation of US-China trade war has prompted many businesses to relocate their business from China. According to the expert China business lawyers, the fear of Chinese authorities crack down on the foreign businesses is quite obvious. But the on ground reality is, foreign businesses don’t need to press the panic button immediately. Here we are explaining the reasons why overseas companies can continue their business operations in China without any hesitation:

Chinese Government will not Shut Down Foreign Firms-

In spite of the Huawei incident, it is quite unlikely that China will go after every foreign firm. There is no incident reported that suggest even a single US or European company has been told to close down their operations from China. US President Donald Trump wants to lower the trade deficit by imposing tariffs, making Chinese imports expensive. This, he hopes, will prompt US citizens to buy products that are made in their country. However, no one is forcing US companies to manufacture goods in China. At the same time, no one is forcing Americans to buy goods made in China. They do so because they see value for money in it.

Chinese Government will not Disrupt Supply Chain-

Given the economic situation of the country, the Communist government of China will hardly disrupt the supply chain. Marriott, Delta Air Lines, Zara and all the other big brands are rapidly expanding their business in the mainland China and signing new deals. The good thing is, Chinese government is fully supporting their new ventures and taken credible actions to reduce the red tape that may disrupt any sort of foreign investment.

China Welcoming Foreign Investment-

Chinese president Xi Jinping at the World Economic Forum in Davos this year, promised improved market access for foreign companies. China is becoming increasingly friendly towards foreign firms operating in the country. A greater number of investor-friendly policies are on the cards to smoothen the overseas investment. However, you need to make sure your China WFOE actually exists and is licensed to do what it is actually doing.

Chinese government is attaching equal importance to the foreign companies as well as the state-owned enterprises in providing a safe business environment. The structural reforms initiated by the Chinese government is a strong signal that this country is still the best place for doing business.

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