China did not ban crypto this week, so why is the internet saying it did?
By Tim Biggs
On Sunday, millions of cryptocurrency investors, enthusiasts and watchers were alerted to some breaking news: China had officially banned crypto trading, mining and related services from the mainland.
The message was repeated, with slight tweaks to the phrasing and occasionally in all caps, across various social media profiles, racking up millions of views. It was extrapolated into articles on investment advice websites, and discussed (albeit shallowly) on short-form video. Google Search interest in the potential impacts spiked, though the results would have mostly shown the same message with little detail. So, what really happened?
Bitcoin’s value dipped slightly off the back of China rumours.Credit: Bloomberg
Did China ban crypto?
Not lately. Despite the commotion there has been no new ban on cryptocurrency in China this week. Or at least, no major Chinese agency or reputable foreign news outlet has reported as much. None of the accounts pushing the announcement has linked to a verifiable source.
In 2021 China did place a ban on mining cryptocurrency, citing the massive energy cost of the activity and the fact that it brought little value to China itself. Last year the country announced that cryptocurrencies were not recognised as legal tender. It has since been illegal for Chinese citizens to issue or exchange tokens, though not to hold them. This has reportedly not stopped crypto being mined and traded in China.
In June, reports circulated through online channels that China had outlawed public ownership of cryptocurrency, though that appeared to be yet another case of misreporting.
Unusual Whales, a paid “options flow analysis” provider, reposted the misinformation on Sunday.
Why does this news keep appearing?
The reporting of a China crypto ban has become a meme in cryptocurrency circles, given that a similar wave of fake news tends to circulate in a constant cycle. The most frequently given explanation is that investors want to manipulate the market to cause the value of Bitcoin or other cryptocurrencies to fall, so they can scoop it up at a lower price. Once a rumour has started, it spreads through social media accounts and other online outlets, which may or may not be complicit in the manipulation, but which benefit by regurgitating the scuttlebutt in any case through engagement.
Any Google search related to China and crypto will be dominated by links to legitimate-looking but largely untrustworthy news sources, as well as social posts across X, Instagram and others claiming the country has made some impactful change. It’s always worth remembering, especially if you’re making financial decisions, to seek out verifiable sources.
The value of many cryptocurrencies did take a minor dip over the weekend, though the coins are so volatile, it’s hard to say whether it’s related to the fake news. Bitcoin fell by 1.05 per cent between Friday and Monday, and Ethereum took a harder tumble of 3.59 per cent, though quickly recovered on Monday.
What is China’s view on crypto?
China has taken a decidedly anti-crypto stance over the past decade, though that hasn’t seemed to dampen mainland activities related to the currencies. China controls the internet through IP-blocking, and controls access to apps by issuing take-down notices that Apple and local Android operators obey. It also has a large degree of control over its banking system. But VPNs and other technologies can effectively provide access to crypto trading in China, and most transactions are coin-to-coin so don’t register in the banking system.
Indeed, the continued use of crypto has caused various headaches for China.
Local governments have seized large caches of currency after finding citizens trading illegally, and have reportedly begun selling it for cash, sparking corruption fears. And the acceleration of US government adoption has driven a push around Asia to adopt stablecoins – that is, cryptocurrencies with value pegged to a non-volatile currency or asset – including in the autonomous Chinese region of Hong Kong.
Is there a Chinese stablecoin connected to the yuan?
Not yet, but major players inside the country appear to be lobbying for one. Reuters reported last month that Chinese tech giants JD.com and Alibaba affiliate Ant Group were urging the central bank to authorise yuan-based stablecoins to counter the growing sway of US dollar-linked crypto.
The idea is that China could allow the launch of stablecoins in Hong Kong, pegged to the yuan, in order to help promote global use of the Chinese currency and fend off the US dollar’s growing digital influence.
Despite its crypto trading ban, China appears to be warming to blockchain as a financial tool. People’s Bank of China governor Pan Gongsheng said in June that stablecoins could revolutionise international finance, as rising geopolitical tensions highlight the fragility of traditional payment systems.
What’s next for crypto globally?
Donald Trump’s “Genius Act” will rush the creation of global coins tied to the US dollar, which could fundamentally change international trade. On the one hand, stablecoins can bring the benefit of decentralisation without the massive risk and volatility. On the other, they can be even more untraceable and open to fraud than physical notes. The US hopes the coins will create trillions of dollars worth of demand for Treasury bills, but they could also lead to a huge rise in tax evasion and other crime.
Writing at the Washington Post, Harvard economics professor Kenneth Rogoff said the rise of a stablecoin tied to the US dollar could exacerbate international crimes like the drug trade, human trafficking and even terrorism, with the US being the only country to benefit.
“Governments everywhere are going to find themselves dealing with a new form of super cash that significantly intrudes on their sovereignty,” he said.
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