However, state repression led to the fact that mining in China gradually began to fade, and today it is completely outlawed.
And all because on September 24, 2021, the People's Bank of China recognized all cryptocurrency-related activities as illegal. Including its extraction, purchase, sale and even storage and sale.
A few days later, on September 28, sites for tracking cryptocurrency rates - for example, the notorious CoinGecko, CoinMarketCap - came under distribution and were banned in the country. Crypto exchanges and information sources such as Twitter had been banned for several years at the time of these events. And even the most popular social networking platform in China, WeChat, did not stand aside - in accordance with its updated policy, all new accounts related to cryptocurrency and NFT are subject to blocking. Since October, mining has become an industry in which it is forbidden to invest. And even Alibaba has completely excluded the sale of any mining devices on all its sites.
Why such categoricality? Firstly, the Chinese authorities perceive cryptocurrency as a tool of fraud and withdrawal of money from the country. Secondly, they are actively developing their digital yuan, an electronic analogue of conventional banknotes, and believe that it does not need competitors. Everything is so serious that now cryptocurrency transactions are officially elevated to the rank of a crime and entail criminal punishment. Article 176 of the Chinese Criminal Code comes into force, according to which the violator faces from 3 to 10 years in prison and a fine equivalent to $7,900 to $79,000.
So are there any exceptions to this complete denial of the crypto industry by China? As usual, yes - and this is Hong Kong. Although it was officially returned to China in 1997, however, it has broad autonomy in all matters, excluding defense and foreign policy. This led to the fact that the region began to develop as a crypto hub, and crypto companies that were forced to leave mainland China began to return to its territory through Hong Kong. The reason for this is the introduction of a new industry regulation regime there, which involves the legalization of cryptocurrencies and transactions with them.
Officially, Beijing does not interfere with this process in any way. From June 1 of this year, a new crypto regulation regime will come into force in Hong Kong, allowing retail investors to trade cryptocurrency. Licensing of crypto exchanges will also become mandatory.
Thus, the position of mainland China in relation to cryptocurrencies remains unchanged and unambiguous. But within the framework of the "one country - two systems" policy, the rapid development of the crypto industry in Hong Kong is becoming more than likely.