China appears to be taking a more permissive stance toward cryptocurrency and digital payments with two ongoing policy developments.
Beijing and Hong Kong Turn to Crypto
The Block reported on May 27 that China’s capital, Beijing, released a whitepaper titled “The Web3 Innovation and Development White Paper (2023)” during a forum event.
The Beijing Municipal Science & Technology Commission intends to turn Beijing into a digital economy hub through the goals laid out in that paper. The city reportedly plans to spend 100 million yuan ($14 million) each year until 2025.
Binance CEO Changpeng Zhao commented on the report. He said that non-fungible tokens and Polkadot founder Gavin Wood are mentioned in the paper.
He noted that another jurisdiction within China — Hong Kong — is introducing new rules that will allow retail crypto users to trade cryptocurrency on June 1.
One major cryptocurrency exchange, Huobi, intends to begin offering its crypto services in Hong Kong as those rules are introduced in the coming weeks. Earlier reports indicate that Binance itself is also taking steps to operate in the area.
Reports from CoinTelegraph on May 23 further suggest that one of China’s state television stations aired a segment regarding the new rules in Hong Kong.
China Banned Crypto In 2021
China effectively banned cryptocurrency in 2021 when it declared transactions related to crypto illegal. Those rules extended to crypto exchanges and mining operations.
However, some reports suggested that the Chinese crypto industry continued despite restrictions, partially fuelled by peer-to-peer trading.
Those restrictions also left space for China’s central bank digital currency (CBDC): the digital yuan or e-CNY. That digital currency system, which gave the government great control over user assets, proved to be a success. In January 2023, China had about 13.61 billion digital yuan in circulation, amounting to about 1/1000th of the entire yuan supply and equivalent to about $2 billion.
While the latest developments in Hong Kong and Beijing could give cryptocurrency businesses more room to operate in China, the country’s digital payments sector appears to be thriving regardless of crypto-related restrictions.