China, one of the world’s most strict jurisdictions for cryptocurrency trading, has not completely banned Bitcoin (BTC), a local non-profit arbitration organization says.
According to a July 30 report published by the Beijing Arbitration Commission (BAC), China’s prohibition of Bitcoin is more nuanced than some have suggested.
Bitcoin does not constitute money in China
In the report, the BAC clarified China’s legal stance on cryptocurrencies like Bitcoin and outlined major crypto-related activities that are prohibited by the government.
According to the BAC, China prohibits token funding and trading platforms from engaging in exchanges between the legal tender and virtual currency or tokens.
The commission then states that the same law that bans cryptocurrency as money, recognizes it as a virtual commodity.
Furthermore, existing laws are, according to the BAC, not specific enough to regulate Bitcoin as virtual property:
“The “General Principles of Civil Law” do not make specific provisions on the extension and connotation of virtual property, but only stipulates that the protection of virtual property must be stipulated by law, and the specific protection measures of virtual property are entrusted to other laws. As the country currently has no laws on Bitcoin, it cannot be recognized as a virtual property.”
“In summary, the state does not prohibit Bitcoin’s activities as virtual commodities, except for the activities that Bitcoin is engaged in as legal tender,” the report adds.
Additionally, since Bitcoin does not constitute money in China — as the government has not approved Bitcoin as a legal tender — and since Bitcoin is not used as an alternative to the legal tender or fiat currency, it should not be associated with an illegal transaction, the BAC said:
“The prohibited transactions include those when Bitcoin is used as a currency. If Bitcoin does not engage in activities as a currency, it is not a transaction prohibited by the state. For example, in the equity transfer contract dispute decided by the Shenzhen International Arbitration Court, the two parties agreed on the return of Bitcoin. Bitcoin is only used as a general property. Therefore, the transaction does not violate relevant national regulations and should be valid.”
Mixed bag for Bitcon, but full steam ahead on blockchain tech
China has emerged as one of the most strict countries in terms of crypto after regulations on local cryptocurrency exchanges back in 2017. The world’s largest cryptocurrency exchange, Binance, which was originally established in China, had to leave the country due the regulations.
However, despite moving towards tighter regulation of Bitcoin, China has not prohibited the cryptocurrency outright. In November 2019, Chinese authorities reportedly said that Bitcoin mining will not be an illegal industry in the country.
The Chinese government is known for its “blockchain, not Bitcoin” approach as President Xi Jinping called on the country to prioritize blockchain development in late 2019.
Alongside aggressive blockchain developments like China’s national Blockchain Service Network, China’s central bank has been progressing with its central bank digital currency. In April 2020, China successfully piloted the project in four cities including Shenzhen, Chengdu, Suzhou and Xiongan.