Cryptocurrency and Its Prospects in China

May 30, 2022

 

2021 and early 2022 marked the high point in excitement for cryptocurrency, NFTs (Non-Fungible Tokens), and blockchain technology worldwide. China has been ahead of the curve with such advances. However, while the first few entrepreneurs made their fortunes, many in China are quickly becoming skeptical about the unregulated new coinage. It wasn’t long before the Internet, traditional media, and word of mouth began associating Bitcoin and cryptocurrency in general with pyramid schemes, still-born projects and lost money.

 

China was not unique in this criticism of cryptocurrency. China’s economy was not set up to accommodate such assets. In September 2021, the Chinese government, not for the first time, rolled out a blanket ban on Bitcoin as it had been banned in some way, shape, or form as many as 19 times since 2009.¹ Why is this the case though? Although many use this story as a negative in the Bitcoin circle, it can be easily argued that the Chinese government has been forward-thinking in this move to secure its own resources, protect its people from financial fraud, and restore control of the future of finance back into the government’s hand.  

 

Currently, in the West, there is a boom in advertising for crypto exchanges. London Underground has been criticized, for example, for aggressive advertising in its stations and carriages,² selling a financial technology that was only recently developed and even more recently its dangers understood.

 

(Source: www.coindesk. com)

 

Crypto exchanges are also beginning to generate huge amounts of bad press in relation to MLM (Multi-Level Marketing) schemes and pyramid selling, which are both highly illegal activities in China. Due to its large population, China can be quite susceptible to MLMs and other related frauds known as chuanxiao, as it is often the poor and the less educated who would easily fall prey to such activities.³

 

MLM selling became popular in the 1990s as a fad introduced from Taiwan via Japan and the United States. During its first run in a less digitally connected world, it ran up against the state for similar ideological reasons to Bitcoin. MLM sold “being your own boss” rather than the collectivism traditionally embraced by the Chinese society.⁴

 

Regardless of the form, MLM and the later transactions of cryptocurrencies are anti-government control in nature, making them fundamentally opposed to the Chinese state’s basic ideals. The ruling party’s motto, “Serve the People,” can be applied here, where the state acts to protect the population against abasing predatory practices that may scam the people. For example, the People’s Bank of China explains in an online article published in 2021 that the trading of virtual currency has contributed to the rise of gambling, fraud, money laundering, and other illegal activities, and therefore it seriously endangers the safety of people’s assets.⁵

 

That being said, it is doubtful that China will abandon the idea of digital currency or blockchain technology once and for all. Digital payments were fast becoming the only way to pay before the pandemic hit in 2019. Furthermore, due to the “dynamic zero-Covid” policy, online shopping has assumed a central place in people’s lives as Chinese people in cities like Shanghai and Beijing are using their phones more than ever to buy food, supplies, and other goods and services during the current lockdown period. In addition, the launch of the digital yuan shows that China is not shying away from promoting digital payments.⁶ So far, the new digital yuan app is now available to users in 23 cities across China. Tencent-owned WeChat also announced that it would begin rolling out the e-CNY as a payment option on its platform, introducing the digital currency to over 1.2 billion users.

 

Yet, the digital yuan does not operate on the blockchain and thus differs from cryptocurrencies in important ways. China is not taking any risks. It will not be the crypto paradise that many libertarians in China envisioned prior to 2019, as the state will make sure that each transaction is appropriately handled and regulated so that latent problems that threaten social stability and security can be successfully warded off.

 

1. Turner Wright, “Crypto Has Recovered from China’s Fud over a Dozen Times in the Last 12 Years,” Cointelegraph (Cointelegraph, September 24, 2021), https://cointelegraph.com/news/crypto-has-recovered-from-china-s-fud-nearly-two-dozen-times-in-the-last-12-years.

2. “Cryptocurrency Ads Reach Record Levels on London Transport,” The Guardian (Guardian News and Media, January 14, 2022), https://www.theguardian.com/technology/2022/jan/14/cryptocurrency-ads-london-transport-tfl.

3. Nancy N. Chen et al., China Urban: Ethnographies of Contemporary Culture (Durham N.C.: Duke Univ. Press, 2001), 27.

4. Nancy N. Chen et al., China Urban: Ethnographies of Contemporary Culture, 31.

5. “关于进一步防范和处置虚拟货币交易炒作风险的通知,” The People’s Bank of China, September 24, 2021, http://www.pbc.gov.cn/goutongjiaoliu/113456/113469/4348521/index.html?mc_cid=b0a97b47fa&mc_eid=f1124a997c.

6. Coco Feng, “Alipay, WeChat Pay Deliver New Features to Support Expanded E-Cny Roll-Out,” South China Morning Post, May 6, 2022, https://www.scmp.com/tech/big-tech/article/3176812/china-digital-currency-leading-mobile-payment-apps-alipay-wechat-pay.