Chinese Currency Breaches 7:1 Exchange Rate Against US Dollar for First Time in Two Years

September 21, 2022 Bitcoin.com

Possession of Bitcoin still legal in China despite the ban, lawyer says

September 16, 2022 Coin Telegraph

China

Crypto holders in China are protected by the law in case of theft, misappropriation or breach of a loan agreement despite the ban on crypto.

Despite enforcing a major cryptocurrency ban one year ago, the Chinese government still protects local crypto investors as crypto is recognized as virtual property protected by the law.

One of the world’s most hostile countries toward Bitcoin (BTC), China has not yet banned the possession of cryptocurrencies, according to David Lesperance, founder of Lesperance & Associates law firm.

Crypto holders in China are protected by the law in case of theft, misappropriation or breach of a loan agreement, Lesperance told Cointelegraph. He emphasized that crypto exchanges are still banned in China.

The lawyer referred to a recent Chinese court case involving a breach of a loan made in the Litecoin (LTC) cryptocurrency. Defendant Ding Hao failed to fully pay back all 50,000 LTC that he borrowed from Zhai Wenjie in 2015, which became a major court precedent involving cryptocurrency in China.

Since 2015, the price of Litecoin has jumped roughly 1,800%, as the cryptocurrency was trading at around $3 seven years ago, according to data from CoinGecko.

On Aug. 31, the Beijing No. 1 Intermediate Court ruled that the defendant owed Zhai the remaining amount of Litecoin, rejecting Ding’s argument that the People’s Bank of China (PBoC) officially banned crypto transactions last year.

“The court has upheld that cryptocurrencies like Litecoin are “property” even though they are created in the virtual realm,” Lesperance said. He emphasized that the crypto community “shouldn’t draw any particular positive inferences” from the case as it was a “very ordinary" commercial loan dispute which was settled under normal property law rules, stating:

“To date, possession of crypto in China has not been banned. [...] It does not make the commercial trading of this type of property legal, as the government has specifically banned crypto exchanges in China.”

While Lesperance says that crypto exchanges are banned in China, some local crypto enthusiasts are confident that the PBoC has never explicitly banned individuals from trading cryptocurrencies.

“It’s true that China doesn't want individuals to trade crypto. But this is never being written in any formal document,” a person linked to the crypto industry in China told Cointelegraph.

According to the source, many mainland users see their bank cards frozen if they use them for crypto over-the-counter (OTC) transactions. However, trusted OTC channels still allow crypto transactions in China.

“So even though trading crypto is not illegal, we don't want to waste our time arguing with banks because obviously, they think everything about crypto is illegal,” the person said.

The latest news brings yet another piece of evidence that crypto has not been totally suppressed in China since the government announced a coordinated crackdown on crypto in September 2021. As previously reported, China returned its position as the second-largest Bitcoin hash rate provider as of January 2022.

Official explains why China CBDC should not be as anonymous as cash

July 26, 2022 Coin Telegraph

Anonymity

While cash is associated with more anonymity, it’s still less mobile and easy to use in large amounts than a digital currency, China’s CBDC project lead Mu Changchun said.

China’s central bank digital currency (CBDC) should not be as anonymous as cash, the head of the People’s Bank of China (PBoC) digital currency institute declared.

Digital yuan project lead Mu Changchun spoke of China’s CBDC project at the 5th Digital China Construction Summit on July 24, local financial publication Sina Finance reported.

Since debuting the digital yuan in 2020, the Chinese central bank has never targeted complete anonymity for the project, Mu said at the event. Instead, PBoC has been working to enable only limited anonymity in compliance with global Anti-Money Laundering (AML) regulations, the official stated.

The Chinese authorities should be able to access CBDC data on people suspected of crimes, Mu noted. According to the official, partial anonymity is an important feature of the digital yuan project though, as it guarantees transaction privacy and personal information protection.

However, a completely anonymous CBDC would interfere with preventing crimes like money laundering, terrorism financing, tax evasion and others, he added.

While cash is associated with more anonymity, it’s less mobile and easy to use in large amounts than a digital currency, Mu emphasized. “The inconvenient nature of carrying cash increases friction for money laundering and terrorism financing. Therefore, the tolerance for the anonymity of cash is relatively low,” the official stated, adding:

“The central bank’s digital currency is more portable. If it provides the same anonymity as cash, it will greatly facilitate illegal transactions such as money laundering. Therefore, the central bank’s digital currency should not have the same anonymity as cash.”

Mu went on to say that regulators risk encountering “serious consequences” if they choose to only focus on privacy protection and ignore the risks associated with financial crimes. “Freedom without constraints is not true freedom,” he added.

Despite rejecting anonymous online financial transactions, PBoC has still been working to ensure the privacy of the digital yuan. According to PBoC governor Yi Gang, the digital yuan has ambitions to be more privacy-enhanced than payment apps.

The problem of user privacy has emerged as one of the biggest issues associated with CBDC projects worldwide. Regulators became puzzled about how to preserve digital privacy while also tracking transactions to prevent illicit financial activity.

In May, the European Central Bank (ECB) suggested that “CBDC with anonymity” was preferable to traditional digital payments like bank deposits in another working paper related to the digital euro. The proposal came shortly after the ECB admitted that digital euro designs lacked privacy options.

Salary payments in USDT stablecoin ruled as illegal in the Chinese court

July 6, 2022 Coin Telegraph

China

Tether USDT stablecoin cannot be used for salary payments, a Chinese court ruled, citing the country’s blanket ban on all types of crypto transactions.

Despite the Chinese government banning all kinds of cryptocurrency transactions last year, some firms apparently still use stablecoins like Tether (USDT) to pay their employees.

Beijing’s Chaoyang District People’s Court has ruled that stablecoins like USDT cannot be used for salary payments, the local news agency Beijing Daily reported on July 6.

The Chinese court stated that virtual currencies like USDT cannot circulate in the market as a currency, which requires all employers to only pay their workers using the official currency, renminbi (RMB).

The ruling came as part of a court case involving a staff member at a local blockchain firm suing his employer for not agreeing to pay his wages in RMB. The plaintiff argued that instead of paying him in RMB, the firm had paid his salary and bonuses in the USDT stablecoin.

Citing China’s blanket ban on crypto enforced in September 2021, the court pointed out that digital currencies like USDT do not have the same legal status as legal tender. The court noted that the plaintiff's request to pay wages and bonuses in the form of RMB fully complies with local laws and the court supports it.

As such, the court ordered the defendants to pay a total of more than 270,000 RMB ($40,000) in wages, performance bonuses and annual bonuses owed to the plaintiff.

As previously reported by Cointelegraph, the People’s Bank of China officially announced a set of measures to fight against crypto adoption in China in September 2021. The action involved 10 Chinese state authorities establishing a new mechanism to prevent financial players from participating in any cryptocurrency transactions.

Despite the ban, some local blockchain executives are positive on stablecoins like USDT. Yifan He, CEO of Red Date Technology — a tech firm involved in China’s major blockchain project called the Blockchain Service Network (BSN) — told Cointelegraph last month that stablecoins should be doing just fine only if properly regulated.

“USDC or USDT are payment-related currencies, not speculative assets. Once they are fully regulated, they are fine,” he said.

Addressing the latest news from China, He noted that all USDT transactions are illegal in China. However, banning such transactions may be too difficult for regulators, the exec suggested. "There is no way to ban USDT payments technically in any country," He said. The expert also believes that USDT and its major rival USD Coin (USDC) are "not popular at all in China."

Tether USDT is a major stablecoin pegged by the U.S. dollar on a 1:1 ratio, backed by U.S. dollars held in U.S. treasury reserves, cash deposits and other assets.

USDT is the third-largest cryptocurrency after Bitcoin (BTC) and Ether (ETH) in terms of market capitalization and is the biggest digital asset in terms of daily trading volumes. At the time of writing, USDT’s daily trading volumes stand at $57 billion, or 247% more than the entire daily trading volumes of Bitcoin.

Deribit and OKX attract significant traffic from China despite a blanket ban: report

May 9, 2022 Coin Telegraph

Bitcoin Price

Recent geographical traffic data highlights that Chinese traders continue to access centralized exchanges despite a regulatory risk.

Data from website traffic metric provider Similarweb shows that Deribit and OKX continue to attract significant traffic sources from China despite a blanket ban on crypto transactions and foreign exchanges last year.

China has banned the use of cryptocurrencies more than a dozen times in the last decade, however, the one imposed in September last year was considered the harshest one.

Several crypto exchanges including Huobi and Binance had shut doors for the Chinese traders in fear of regulatory action. The strict regulatory reforms ensured that Chinese traders mainly shifted their focus to decentralized exchanges and protocols.

Chinese crypto traders have always found a way to bypass strict crypto regulatory measures imposed by the government. While many believed the blanket ban on crypto use would be a death nail for the largely underground crypto market in China, geographical traffic data shows otherwise.

A Cointelegraph exclusive report highlighted the rise in the use of virtual private networks among Chinese traders after the blanket ban. Recent data from Similarweb verifies that Chinese traders are still flocking to centralized derivatives platforms such as OKX and Deribit.

Huobi was the primary choice of Chinese crypto traders as they accounted for more than 30% of the trading volume on the exchange before the blanket ban. However, now Deribit leads the chart in terms of Chinese traffic with a 12% share followed by OKX with 9.6%.

*Geographical Traffic Source For Crypto Exchanges Source: Similarweb*

Another prominent reason for the rise in traffic on derivative exchanges could be the lack of strict KYC measures when compared to the likes of Huobi and Binance.

The geographical data shows that Russia, South Korea, the United States, and Turkey were the biggest traffic source on centralized exchanges like Binance and Coinbase. Bybit and FTX were the most visited crypto exchanges in the month of April.

Residents of 3 Chinese cities paying taxes and charges with digital yuan

April 29, 2022 Coin Telegraph

Airdrop

China has expanded its central bank digital currency pilot program to include the payment of tax, stamp duty and social security.

Residents in three major Chinese cities have begun paying tax, stamp duty and social security premiums using the country’s central bank digital currency — the digital yuan (e-CNY).

According to a domestic news report, a number of government agencies in the Zhejiang province — located just south of Shanghai — are currently running real world trials programs that involve citizens using the digital yuan to pay taxes.

The Zhejiang Taxation Bureau is working with the country’s central bank — the People’s Bank of China (PBoC) — to explore a variety of taxation payment methods using the digital yuan.

The PBoC and affiliated local government agencies are reportedly looking to the next major test for the digital yuan, the Asian Games which will take place in Hangzhou in September. Local authorities claim that the digital yuan could be used to streamline calculating tax-related activities.

Following the successful steps in the implementation of the digital RMB pilot program, which began public testing in April 2021, the PBoC stated that it will look to extend the program to more Chinese cities including Guangzhou, Tianjin and Chongqing.

On the other side of the ledger to taxation, one local government has chosen to “airdrop” 15 million digital yuan ($2.25 million) to its residents hoping to boost consumer spending during the pandemic, and promote use of the new currency.

Roughly 130,000 residents of the Futian district in Shenzhen will receive a share of the 15 million digital yuan (e-CNY) in the form of a red envelope via Chinese social media app, WeChat. The digital RMB airdrop marks the most recent government attempt to boost spending in areas of China most affected by the recent Covid-related lockdowns.

In Chinese and other East Asian cultures, monetary gifts are often handed out in red packets or envelopes, as the colored wrapping bestows good wishes and luck upon the recipient.

These developments extend China’s already significant lead in developing a central bank digital currency (CBDC) for public use, with the majority of countries still in the research stages of CBDC implementation.

According to state media, transactions in digital yuan across China came to nearly 87.6 billion yuan by the close of 2021.

China-based regulatory and trade associations target NFTs in latest risk notice

April 13, 2022 Coin Telegraph

China

“We solemnly call on consumers to [...] be vigilant and stay away from NFT-related illegal financial activities,” said the associations.

The China Banking Association, the China Internet Finance Association and the Securities Association of China issued a joint statement warning the public about the “hidden risks” of investing in nonfungible tokens, or NFTs.

In a Wednesday notice, the three associations launched initiatives aimed at encouraging innovation in the crypto and blockchain space focused on NFTs as well as “resolutely curb[ing] the tendency of NFT financialization and securitization” to reduce the risks around illicit activities. The China Banking Association said member institutions should not consider NFTs assets like securities, precious metals, and other financial products.

In addition, cryptocurrencies including Bitcoin (BTC), Ether (ETH) and Tether (USDT) should not be used for the pricing and settlement of NFT transactions, platforms should perform real-name authentication and follow Anti-Money Laundering requirements, and associations and firms in compliance should not invest in NFTs or provide financial support to others for doing so. Other measures in the proposed code of conduct included not providing centralized transactions and not weakening the tokens’ nonfungibility “by dividing ownership or batch creation, and carrying out token issuance financing in disguise.”

“We solemnly call on consumers to establish correct consumption concepts, enhance their awareness of self-protection, consciously resist NFT speculation and speculation, be vigilant and stay away from NFT-related illegal financial activities, and effectively safeguard their own property safety,” said the associations. “If relevant illegal activities are found, they should be reported to the relevant departments in a timely manner.”

The associations proposed:
- NFTs shouldn't represent financial assets like bonds, insurance, or precious metals
- NFTs shouldn't be used to facilitate #ICOs
- members of the associations shouldn't provide centralized exchanges for NFTs
- NFTs cannot be transacted in crypto...
— China Boring Tech (@ChinaBoringTech) April 13, 2022

China-based regulatory associations have previously issued warnings to the public about investments in cryptocurrencies while also calling on member institutions to abide by existing regulatory provisions regarding digital assets. The country officially banned crypto exchanges from providing services in 2017, but many individuals were able to use local bank accounts for crypto-related transactions before the People’s Bank of China started cracking down on the activity in 2021.

Some of China’s social media websites, including WeChat, have removed NFT platforms in 2022 seemingly in anticipation of a government crackdown. However, Chinese multinational e-commerce firm Alibaba Group — one of the largest companies in the world with a $272 billion market capitalization, launched an NFT marketplace in August 2021 that allows users to sell tokens representing licenses to copyrights.

China’s share in Bitcoin transactions declined 80% post crackdown: PBoC

March 3, 2022 Coin Telegraph

Beijing

China has carried out multiple crypto crackdowns and enforced numerous bans on crypto markets since 2013, however, Chinese traders have always found a way to bypass these bans.

People’s Bank of China, the central bank of the country, claimed in a recent note that China's share in the global Bitcoin (BTC) transactions has rapidly dropped from over 90% to 10%.

The Financial Stability Bureau of the Chinese central bank released a comprehensive note on Wednesday discussing the impact of the crypto crackdown on the financial markets. The official notice claimed that all peer-to-peer exchanges in the country had been eradicated, which eventually curbed the hype around digital currency transactions.

A Google translated version of the note read:

“The global proportion of Bitcoin transactions in China dropped rapidly from more than 90% to 10%. Severely cracked down on illegal financial activities such as disorderly handling of finance and crackdown on illegal fund-raising crimes.”

China is among the few nations that have maintained an outright passive stance against crypto use since the beginning. The country’s first ban came in 2013 when it prohibited banks from handling Bitcoin transactions.

This was followed by a ban on local cryptocurrency exchanges in 2017, forcing them to shut their operations completely. The country later ramped up its crypto crackdown efforts in 2021, where it carried out multiple regulatory operations to eradicate Bitcoin mining from the country and by September 2021, it had deemed all crypto transactions illegal.

According to data from Statista, the annual share of Bitcoin trading volume in digital yuan has dropped to near zero by 2018, post a ban on cryptocurrency exchanges.

*Share of Chinese yuan in BTC transaction volume. Source: Statista*

The trading volume of BTC in the Chinese yuan might have dropped down to near zero, but the decentralized nature of Bitcoin makes it impossible to ban.

After a ban on local crypto exchanges in 2017, many Chinese traders turned to foreign crypto exchanges via VPN. When the Beijing government banned foreign crypto exchanges from offering any services in mainland China, as well, the Chinese traders flocked to decentralized finance (DeFi) for trading anonymously.

Tencent files for patent related to virtual concerts in Metaverse

March 3, 2022 Coin Telegraph

bank of china

Chinese tech colossus Tencent has continued its foray into the metaverse after filing a patent for virtual concerts, flying in the face of warnings from Chinese banks and regulators.

Chinese tech conglomerate Tencent has filed for a virtual concerts patent with the Chinese National Intellectual Property Administration (CNIPA) according to business data-tracker Qichacha. The application comes as Chinese companies race to secure Metaverse trademarks.

Even though the People’s Bank of China (PBoC) took a strong stance against the Metaverse and nonfungible tokens (NFTs) in November, stating that it would track them with Anti-Money Laundering tools, more than a thousand Chinese companies have submitted over 16,000 metaverse-related trademark applications according to a report from Chinese news outlet, The Paper.

Despite the warnings, the Chinese multinational technology and video-game colossus Tencent, has been leading China’s charge into the Metaverse.

According to the South China Morning Post, sources claim that Tencent sent out an internal letter to its employees in October last year, concerning the creation of a new “F1” studio under its subsidiary TiMi Studios that will involve employees from China, the United States, Canada and Singapore.

On December 31 last year, Tencent held China’s first ever virtual concert in the Metaverse, a New Years celebration called TMELAND which saw over 1.1 million fans join in over the duration of the festival. Tencent has also acquired Los-Angeles-based animated concert company Wave, which uses a motion-capture technology to create realistic virtual concerts.

Ring in 2022 in #TMELAND, China’s first virtual #MusicFestival. Groove to the music on #NYE from your couch while your #avatar meets world-renowned DJs and artists with other partygoers. Dive in via #QQMusic, #WeSing and other Tencent Music apps. Happy #NYE2022 pic.twitter.com/hLrqvjX1Yn
— Tencent 腾讯 (@TencentGlobal) December 31, 2021

Wave concerts have been extremely successful in the past, and grew in popularity during the pandemic as a new way for musicians to engage with fans. When the The Weeknd used Wave services to broadcast a virtual concert live on TikTok in August last year, it drew approximately 2 million viewers globally and raised $350,000 for the Equal Justice Initiative.

It remains to be seen whether the ambitions of the Chinese multinational will be affected by local regulators. Speaking at a national financial security summit on Nov. 26, Gou Wenjun, director of the Anti-Money Laundering (AML) unit at the PBoC, warned of the dangers associated with the new trends of the crypto ecosystem, such as NFTs and the Metaverse. He claimed that if left unregulated, these assets could be easily used for illicit purposes such as money laundering and tax evasion.

The People’s Daily, the official newspaper of the Chinese Communist Party, has also issued a warning about the Metaverse back on Dec. 9, stating that, “regulation should be encouraged to come before innovation.”

Despite the ominous foreshadowing from national media and state-controlled banks, China has still not provided any further clarity on related regulations.

Here’s how much digital yuan used at Olympics, according to PBoC

February 16, 2022 Coin Telegraph

CBDC

Foreign users tend to use hardware e-CNY wallets more at the Olympics, while domestic users mainly go for software wallets.

The 2022 Winter Olympics participants, visitors and organizers could be spending more than $300,000 in China’s digital yuan every day, according to new reports citing officials from the People’s Bank of China.

The e-CNY, China’s central bank digital currency (CBDC), is being used to make 2 million yuan ($316,000) or more worth of payments each day, PBoC’s Digital Currency Research Institute director-general Mu Changchun said. The official provided the data during a webinar hosted by the Atlantic Council, Reuters reported Tuesday.

“I have a rough idea that there are several, or a couple of million digital yuan of payments every day, but I don't have exact numbers yet,” Mu said, adding that there was no breakdown yet of the number of transactions made by Chinese nationals and foreign attendees.

The official still noted that foreign users tend to use hardware wallets more, referring to the e-CNY payment cards, which look like credit cards without the normal chip and magnetic strip. “The software wallets are mainly used by domestic users,” Mu added.

The reported amount is a significant contribution to China’s CBDC rollout, given that the total digital yuan transaction volumes hit $13 billion by November 2021 since the Chinese CBDC was first launched in April 2020.

As previously reported by Cointelegraph, the PBoC has been widely promoting the use of the Chinese CBDC at the 2022 Winter Olympics. The state-controlled Bank of China set up a number of special ATMs at some central venues at the Games, allowing international guests to convert their foreign banknotes into e-CNY or normal yuan banknotes.

The digital yuan’s availability has triggered some concerns over cybersecurity and privacy from the global community, with some United States senators reportedly viewing the digital yuan as a “tremendous security threat to individual users.” In late 2021, British spy chief Jeremy Fleming argued that the CBDC use could allow Beijing to monitor users and control global transactions despite presenting a great great opportunity to democratize payment systems.

While actively pushing CBDC adoption, China has taken an extremely anti-cryptocurrency stance, with the government banning all crypto transactions in September 2021. According to the latest reports, as many as 2 million crypto mining devices are stuck in China’s former crypto mining hub, Sichuan province, after the government halted operations. Miners attempting to move operations to North America have reportedly lost millions of dollars while trying to export crypto mining hardware.

Peoples Bank of China