Cryptocurrency ruling in China has always been a gray area. In 2017, China banned initial coin offerings (ICOs), which are fundraising activities involving cryptocurrencies. A number of cryptocurrency exchanges that operate within the jurisdiction of the government were also ordered to close.
Following the ICO ban, China implemented strict regulations on cryptocurrency trading. On both local and international exchanges, Chinese citizens are prohibited from trading cryptocurrencies.
Chinese authorities have conducted various crackdowns on cryptocurrency-related activities, such as shutting down crypto-mining operations and targeting illegal activities associated with digital currencies.
Despite restrictions on private cryptocurrencies, the People’s Bank of China (PBOC) has been developing its own central bank digital currency (CBDC) called the Digital Currency Electronic Payment (DCEP) or Digital Yuan. The aim is to have a controlled digital currency that the government can monitor and regulate.
However, recent data from FTX bankruptcy files indicates that about 8% of its users are Chinese.
A recent ruling by the Supreme Court of the country may bring new hope to cryptocurrency. The Supreme Court has ruled that digital assets (crypto) can be used to settle small debts despite its ban in the country.
The court ruled that “if it is agreed between the parties that a small amount of virtual currency shall be used to compensate the debts arising from a mutual exchange, labor service, and other basic relations if there are no other invalid causes, the people’s court shall recognize the contract as valid.”
It was also clarified by the top court that if one party agrees to transfer cryptocurrencies to another, but the receiving party cannot fulfill their end of the deal due to policy restrictions, the court will determine compensation based on the actual value of the property at the time the contract was signed.
WHAT IT COULD MEAN FOR CHINESE CITIZENS?
If cryptocurrencies are accepted as a means of debt payment, it would likely lead to increased adoption and acceptance of cryptocurrencies among the general population. This move could encourage more individuals to acquire and use cryptocurrencies for everyday transactions, potentially driving further integration of digital currencies into the mainstream economy.
Cryptocurrencies have the potential to promote financial inclusivity by providing access to financial services for unbanked or underbanked populations. Allowing the use of cryptocurrencies for small debt payments could facilitate financial inclusion, as individuals who may not have traditional bank accounts could participate in the economy and settle their debts using digital currencies.
We may likely see more usage of digital assets by the citizens of the country, hence, contributing massively to the crypto ecosystem.
In conclusion, the recent ruling by the Supreme Court of China allowing the use of cryptocurrencies to settle small debts represents a potential shift in the country’s stance on digital assets. While China has been known for its strict regulations and crackdowns on cryptocurrencies, this ruling brings new hope for the adoption and acceptance of cryptocurrencies among Chinese citizens. If cryptocurrencies become a widely accepted means of debt payment, it could drive increased usage and integration of digital currencies into the mainstream economy. Moreover, this move could promote financial inclusivity by providing access to financial services for those who are unbanked or underbanked. As more Chinese citizens embrace digital assets, it is likely to have a significant impact on the broader crypto ecosystem. However, it remains crucial to monitor any accompanying regulations and guidelines set by the Chinese government to understand the full implications of this ruling.