Rumors are actively spreading online that China may lift its ban on cryptocurrencies by the end of this year. Over the weekend, discussions about this possibility began on the platform X (formerly Twitter), with Galaxy Digital CEO Mike Novogratz noting that he had also heard about it.
If this is true, and I’ve heard about it for the second time in recent weeks, then it is very important. Does anyone have any ideas?
Novogratz wrote
One reason for these rumors is the conclusion of legal proceedings involving Justin Sun. Recall that at the end of June, the founder of the Tron network won a defamation case in the People’s Court of China. In 2022, Sun filed a lawsuit against the Chongqing Business Media Group news agency, which accused him of insider trading, fraud, and money laundering. In an interview with The Block, Sun noted that China’s reputation as an opponent of digital assets is exaggerated and expressed hope that anti-cryptocurrency jurisdictions, such as Shanghai, would soon change their stance.
Reasons for the Cryptocurrency Ban in China
China began restricting cryptocurrency trading in 2017, banning banks and payment systems from working with digital assets. In May 2021, the People’s Bank of China declared all transactions with bitcoin and other cryptocurrencies illegal, later expanding the ban to include mining, storage, and use of cryptocurrencies.
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The main reasons for the ban are:
- Capital control: Authorities are concerned about using cryptocurrencies for money laundering and tax evasion, aiming to maintain control over capital flows.
- Financial stability: The PBOC considers cryptocurrencies a threat to financial stability due to their volatility and decentralized nature.
- Digital yuan: China is promoting its digital currency, striving to make the digital yuan the dominant payment system.
- Energy savings: Bitcoin mining requires significant energy resources and exacerbates environmental problems.
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Impact of the Ban on the Cryptocurrency Market
China’s ban on cryptocurrencies had a significant impact on the market. In September 2021, bitcoin fell by 50%, and trading volumes on Chinese exchanges sharply declined. Many investors in China were forced to withdraw their funds urgently, leading to reduced liquidity.
Despite the ban, cryptocurrencies remain popular among Chinese investors. In 2023, they earned over $37 billion, ranking among the top five in terms of profits.
