Will Other Countries Follow China’s Crypto Ban?

Is it possible that other countries could ban crypto trading similar to the steps taken by China? A few countries have a strict ban in place that is similar to the Chinese rules, while some countries have a soft ban under which certain activities related to crypto trading are restricted. For example, Indian policymakers have proposed a bill that could lead to tight restrictions on crypto trading. The indecision by authorities has left investors and traders in limbo. Several countries have gone in the other direction. In the United States, crypto trading is available to anyone that has a PayPal or Venmo account. You can trade crypto through a stock account using some indices, or through a regulated exchange called Coinbase.

What Happened in China?

For more than eight years, the Chinese government attempted to crack down on crypto trading. Instead of using a complete ban on any activity related to cryptocurrency, the government worked around the edges. In September of 2021, the People’s Bank of China (PBOC), the Chinese Central Bank, announced that all activity related to cryptocurrency trading would be considered illegal. The piecemeal approach was not working as so many gray areas allowed miners, handlers, and traders to side skirt the law. 

Following the announcement by the PBOC, several other Chinese government agencies joined the central bank in stating that any activities related to cryptocurrency trading are considered illegal. These rules include systems development, database management, and coding exchanges that allow investors or vendors to hold digital coins. The ban also contains restrictions that prevent the mining of blockchain digital currencies. The new regulations will force miners working in Chinese-controlled regions to cease their activities or move to an area not controlled by the Chinese authorities. 

Why China’s Actions Could be Followed by Other Countries

China decided to ban crypto trading because they were concerned that a decentralized currency would take the place of the Chinese Yuan. The Chinese economy is not a capitalist regime, and therefore it wants to control the movements of its money as it deems necessary. China is not the only country worldwide concerned with a decentralized currency taking over and replacing a sovereign currency. Despite the acceptance of cryptocurrencies in the United States, regulators have expressed concern about Bitcoin replacing the U.S. dollar as the world’s reserve currency. 

As a frame of reference, the Securities and Exchange Commission Chairman Gary Gensler taught a class on decentralized finance at The Massachusetts Institute of Technology (MIT). The thesis was that crypto trading has no place in the U.S. financial system without thoughtful oversight and regulation. While the United States allows investors to trade cryptocurrencies through companies like Coinbase, PayPal, and Venmo, this thesis from an authority at the highest government level could be the impetus that renders cryptocurrencies unusable. The gauntlet laid down by China might be the first step in other countries following suit. There have been arguments made by those in favor of deregulated finance advocating that cryptocurrencies were beyond the reach of regulators. What can be seen from the crackdown in China is this theory is not the case. 

Those who argue against crypto trading say that the emergence of digital coins is the new wild west. Gensler points to a time in U.S. history when individual state-charter banks issued their crip, which did not have any intrinsic value. Eventually, this experience did not end well and forced the United States to create a single currency, the U.S. dollar. 

Have Other Countries Banned Cryptocurrencies?

China is not the only country that has banned crypto trading. Bolivia, a South American country, put a complete ban on any currency that does not fall under the regulatory regime of the Bolivian economy framework. The concern by the Bolivian government was that criminal activity would arise if crypto trading were legal. 

Indonesia also has a complete ban on cryptocurrency trading. The central bank created these rules and restricted the use of digital coins beginning in 2018.

Turkey decided to ban the use of cryptocurrencies after experiencing a surge in decentralized transactions using digital coins. The guidelines include any service or trading that is direct or indirect to protect against money laundering and terrorism. 

The Bottom Line

The upshot is that there are countries that might follow in the path of the PBOC and create a complete ban on crypto trading. Issues stem from the ability of the country to regulate a decentralized coin to the need to control economic and monetary policy. Several countries like Bolivia, Turkey, Egypt, and Indonesia have already issued a complete ban on crypto trading activities within their respective countries. While the United States allows and regulates crypto trading, several government officials are very concerned about the use of decentralized finance and how it can impact the United States economy. There are also several who are worried that a cryptocurrency could take on the U.S. dollar as the world’s reserve currency.