Professor of finance and economics at Peking University’s National School of Development and former member of the People’s Bank of China’s Monetary Policy Committee Huang Yiping explains in a piece by blockchain reporter Colin Wu why China is cautious about cryptocurrencies.
China doesn’t think cryptos are real currencies
According to Yiping, adopting a position on cryptocurrencies requires careful consideration of several different variables. To begin, he says that cryptocurrencies such as bitcoin are not technically currencies; rather, they are more comparable to digital assets owing to the absence of any fundamental value associated with them.
In addition to this, research has shown that around one-quarter of all Bitcoin account holders and almost half of all trading activity is tied to unlawful activities, which he mentioned as another point of interest.
Second, the level of development of a nation’s monetary and regulatory infrastructure is a major factor in determining how regulators feel about cryptocurrencies and other forms of digital assets.
According to Yiping, the most important reason why China has banned trade in cryptocurrencies is that the government is still facing substantial issues in the area of anti-money laundering.
Additionally, the nation maintains a number of regulations on its capital account. If digital assets such as cryptocurrencies are allowed to be exchanged freely, it will lead to more complications than advantages.
Lastly, he emphasized the need to look at the broader patterns in-depth. It is important to do in-depth research to determine whether or not a ban on cryptocurrencies is viable in the long run before deciding whether or not to implement such a policy.
Tokenization, distributed ledgers, blockchain technology, and other similar innovations are some of the new digital technologies that the advent of cryptocurrencies has made possible and are beneficial to the traditional financial system.
According to the economist, a protracted ban on cryptocurrency trading and activities connected to it runs the danger of losing out on significant advancements in the digital space, and prohibitions may not be effective for very long.
There is no particularly good recipe for how cryptocurrencies should be regulated, especially for a developing country, but ultimately an effective approach may still need to be found.
Huang Yiping
Latest on China and crypto
For a very long time, China has had a tumultuous relationship with the cryptocurrency sector. The Asian country has been uncertain about the rules of cryptocurrencies, which have varied from a complete ban to exploring the value of blockchain. Recently, several regional governments have begun to levy a steep income tax on cryptocurrencies like Bitcoin and Ethereum.
According to a report written by Colin Wu on January 25, a number of cryptocurrency whales, miners, and other investors have stated that they have been subjected to personal income tax audits by their respective local tax departments, which began in the early part of 2022 and for which they are still awaiting the results.
As stated in the report, this indicates the application of a personal income tax of 20% on the investment earnings of individual cryptocurrency investors and numerous Bitcoin (BTC) miners after many big local exchanges delivered significant information about some of the whales’ activities to the tax authorities.
