China banning crypto has become a meme, and their shutting down of centralized crypto exchanges will not be forgotten easily, but have they really banned cryptos or have they failed miserably?
We ask because recent news coming from there paints a picture of a booming crypto industry with a new generation enthralled by Solidity which they keep searching on Google.
“Next time people tell you bitcoin is banned in China, show him this pic,” says a Chinese cryptonian who further publicly informs us that China’s official news agency, Xinhua, said on Wednesday:
“Chinese investors can still buy ICO tokens easily, by first using RMB, China’s fiat currency, to buy BTC/USDT with over-the-counter trading platforms.”
This dichotomy where cryptos are both banned and not banned is due to a peculiar feature of all regulatory systems whereby the Central Bank of a nation has the authority to direct commercial banks to not do business with something even if that something is perfectly legal.
The Chinese parliament has passed no law to ban cryptos, therefore technically cryptos are not banned. The Chinese Central Bank has however issued a diktat to ban commercial banks from serving crypto exchanges in a move that in many ways usurps accountable governing systems both in China and elsewhere.
Like India, where the central bank there has issued a similar diktat. This however is now being challenged at India’s Supreme Court where the matter has been adjourned for days on end, yet the decision will have considerable constitutional ramifications for the unelected central bank would be able to rule over parliament in financial matters if the Supreme Court goes their way.
Hence why we keep hearing of cryptos being banned in China – true to a limited extent as far as commercial banks decisions – and we keep hearing of cryptos being accepted.
The latter is the case because although they can ban centralized chokepoints, like exchanges, they can’t ban ordinary people sending money to one another, with banks having no way of knowing whether bitcoins are given in return.
Yet in China the situation is even more murky because China’s version of Amazon and Google used to accept cryptos once, then they stopped under pressure from the Chinese Central Bank.
Now we’re hearing of a Chinese hotel (pictured) to accept ethereum according to local media, a first for China, and perhaps a first for the entire world.
The only way to make sense of this is again China’s Central Bank arbitrarily intervening to pressure certain commercial banks with threatening account closures of certain businesses.
Naturally, China’s Amazon and Google are far more prominent than some hotel, so they were forced to stop accepting cryptos while the rest are so many that the bank arguably can’t go around policing it all without significant backlash.
Now, some four years after Baidu was forced to stop accepting bitcoin, they have launched a whitepaper for their own blockchain.
On the surface, it sounds more like a trusted and centralized blockchain with it not even open sourced. They say they will open source it, but apparently have already secured some 50 patents related to this blockchain.
Their blockchain has a plug-in consensus, which presumably means Baidu runs it all with ordinary people probably not quite able to run a node. Yet it shows the situation in China is not quite black and white as far as cryptos are concerned.
The country, of course, is home to 80% or more of crypto mining. That brings in billions to the economy, and employs thousands if not tens of thousands.
Although previously there were suggestions the government has asked them to leave, they have in fact left miners alone, with Chinese mining booming and China very much a leader in that aspect.
Something which sounds like cheating, from a macro perspective, because China is exporting (selling) all this crypto while unwilling to import (buy) any due to little means of doing so after they shut down centralized crypto exchanges.
This may have perhaps not played much of a role in Trump’s measures towards China, but it may have played some role for he has argued China engages in the unfair treatment of tech companies.
China’s mistaken approach is moreover, to some degree, harming its economy with one easy example being Bitmain’s choice to IPO in Hong Kong rather than in Shanghai.
The IPO is expected to raise billions, with Bitmain generating some $2.8 billion dollars in revenue this year and about one billion dollars in profits.
Those are some big numbers, even for the world’s biggest economy. And the elders there may think what they please, but the young must find it insulting that it is not Shanghai boasting of hosting the first crypto company to go public. A defining moment, undoubtedly, for a generation. A moment of inspiration, for many, of the miracles that tech and science continues to provide.
Yet, arguably, the elders there have passed no judgment, except for implicitly by allowing the central bank to run amok.
Eventually, they may too learn of just what exactly is this tech, and then they too may u-turn as have all who have looked at just what exactly is there.
And if they don’t, we’ll wait them out. The millennials will eventually take over. Until then, they appear to generally be ignoring the central bank, trading Over the Counter (OTC), getting them cryptos, getting them tokens, building them smart contracts and joining the global party as the digital revolution continues.