Last week, the Shenzen Court of International Arbitration in China ruled to legalize Bitcoin and classified it as an asset that can be owned by entities and businesses. This ruling effectively lifts the ban it placed on Bitcoin (and other cryptocurrencies) towards the end half of 2017. What's interesting about this ruling is that they are steering away from calling it a digital currency and closer to an asset like gold.
Here on out, cryptocurrencies can legally be used for payment and spending in China. However, even during China’s “ban” there was plenty of Bitcoin activity in the country. Looking at Coindance statistics on LocalBitcoins exchange data we start to see the bigger picture. Due to the privacy LocalBitcoins offers, it’s no wonder that Bitcoin transactions saw an increase during the ban period.
The Chinese government has been averse to many popular technologies in the past. This occurred with the ban of Facebook, Google, YouTube, Twitter, Uber and other notable technological revolutions originating from the Western world. If something is regulated by China, it’s usually a groundbreaking technology.
China’s cautious view on Bitcoin and other cryptocurrencies are somewhat justified as they are a perfect solution to China’s tight capital control. In addition to the monetary risks, cryptocurrency is usually associated with cases of several fraudulent ICOs, exchange hacks and scams.
By legalizing Bitcoin and other cryptocurrencies, China can set more clear guidelines surrounding tax law and blockchain technology. China still appears to be heavily against ICOs and privacy currencies. At press time, ICO participation is still illegal in China.
Several months ago, we saw Neo go to great lengths to be regulatory compliant with the Chinese government. This is partly done by linking digital identities to individuals. While this is somewhat counter-intuitive to cryptocurrencies original goals, it’s a great step for more cryptocurrency adoption.
Last week, we saw the steps that India and Japan took to make cryptocurrency exchanges safer for their citizens. As time goes on, expect more and more countries to set clearer laws surrounding cryptocurrency. The United States is one of the last major countries to be relatively silent on its stance on cryptocurrency. The upcoming S.E.C ruling on a Bitcoin ETF will be a huge indicator of what's to come.