In a recent court ruling in China’s Jiangsu province, a man named Mr. Xu was left without legal protection for his 341 Bitcoin loan ($9.9 million) to Mr. Lin. This ruling has sparked a debate about the legal status of Bitcoin and other cryptocurrencies in the country. The court dismissed Mr. Xu’s case, stating that Bitcoin is not considered a legal currency and therefore cannot be subject to legal actions or used for compensation. This ruling highlights the risks associated with lending cryptocurrency, as the lender bears all the risks in such transactions.
The ruling on the Bitcoin loan case raises questions about the legal status of cryptocurrencies in China. Currently, all forms of cryptocurrencies and transactions are illegal in the country, as the government has been cracking down on private blockchain initiatives. The Chinese government favors centralized blockchain and is actively promoting the digital yuan central bank digital currency (CBDC). However, there have been rulings that recognize certain digital assets, such as non-fungible tokens (NFTs), as online virtual property protected under Chinese law. This contradictory stance on cryptocurrency highlights the complexity of blockchain regulations in East Asia.
The Multichain incident in China shed light on the potential involvement of third-party tracking companies in the arrest of individuals associated with blockchain projects. When the co-founder of Multichain, Zhaojun He, was arrested by Chinese police, the protocol had to be shut down as he had discretionary control over the server-based and private keys. However, the arrest led to suspicious transactions, with assets stored on the Multichain bridge being swapped for stablecoins and transferred out of the protocol. Stablecoin issuers like Circle and Tether froze over $63 million of these suspicious transactions. Some users suspect that third-party tracking companies provide leads to the police, resulting in the arrests and seizure of assets.
The crackdown on blockchain initiatives in China started with the government’s efforts to centralize the technology. Chinese police raided the offices of CNHC, a Chinese offshore-yuan stablecoin issuer, and reportedly detained its executive. Similar to Multichain, no news has been heard from CNHC since the raid. This crackdown on blockchain projects demonstrates the Chinese government’s control over the technology and its intention to promote centralized blockchain, such as the digital yuan CBDC.
Recent reports of Huobi exchange’s senior executives being arrested by Chinese police have created uncertainty in the cryptocurrency industry. However, Huobi denied these reports as “fake news,” and its owner, Justin Sun, labeled them as fear, uncertainty, and doubt. Nevertheless, rumors emerged that Sun allegedly withdrew $60 million from the exchange after the news broke. There are claims that some Huobi staff are currently under criminal investigation. Despite these controversies, Sun claims that Huobi is generating significant profits. The decline in Huobi’s USDT reserves and total assets, however, raises concerns about the stability of the exchange.
East Asia’s blockchain industry is characterized by a complex and ever-changing regulatory landscape. The legal status of cryptocurrencies, such as Bitcoin, in China remains uncertain, with conflicting rulings regarding their recognition. The crackdown on blockchain initiatives by the Chinese government further adds to the uncertainties and challenges faced by industry players. The involvement of third-party tracking companies in arrests and asset seizures raises concerns about privacy and security. Moreover, controversies surrounding exchanges like Huobi highlight the volatility of the market and the risks associated with cryptocurrency investments.
Blockchain in East Asia is a rapidly evolving field that presents both opportunities and challenges. The legal status of cryptocurrencies, the crackdown on blockchain initiatives, and controversies surrounding exchanges contribute to the complexities of the industry. As the regulatory landscape continues to change, it is crucial for individuals and businesses to navigate the challenges and stay informed about the latest developments in the region.