China Enforces Blanket Ban on Cryptocurrency Mining and Trading

Since 2021, China has enforced a blanket ban on cryptocurrency mining and trading, with the Chinese government focusing solely on promoting its central bank digital currency (CBDC), the digital yuan.

China's calculus regarding Bitcoin and cryptocurrency has been a subject of ongoing discussion. Recently, Ming Zhang, the deputy director of the Chinese Academy of Social Sciences (CASS), penned an article for Study Times, offering insights into the Communist Party's thoughts on digital currencies, including Bitcoin, Central Bank Digital Currencies (CBDCs), and Stablecoins.

CASS is a state-backed research institute and a ministry-level institution under the State Council of China, meaning its reports often align with the government’s broader economic and financial policies.

Here’s all Zhang Ming and China’s CPI have to say after making first such public mulling on cryptocurrencies

The value of cryptocurrency is determined neither by the sovereign credit of a country nor by other currencies or financial assets linked to the currency, but by a set of rigorous computer algorithms. But the biggest problem with Bitcoin is that its price fluctuates greatly. The price peak of a Bitcoin once reached more than $100,000, and it fell to around $86,000 in early March 2025.

Is China really avoiding Bitcoin and Crypto?

Bitcoin (BTC) maintains its dominance in the crypto market with a market cap of around $1.67 trillion, representing 58.27% of the total crypto market followed by Ethereum.

China has officially banned Bitcoin trading and mining, but its connection to BTC remains complex yet significant. Despite the ban, China still influences Bitcoin. There are reports that suggest that Chinese miners secretly operate using VPNs and off-grid setups, contributing to Bitcoin’s hashrate. Additionally, the Chinese government allegedly holds 194,000 BTC, mostly seized from criminal cases, making it one of the world’s largest holders. While public crypto use is restricted, underground trading persists through peer-to-peer (P2P) markets and offshore exchanges.

However, China is still not ready to accept the potential of Bitcoin with Ming Zhang arguing,

Although Bitcoin is a type of digital currency, it cannot truly perform the functions of currency due to the following two characteristics.

On the one hand, the huge fluctuations in Bitcoin prices make it difficult for Bitcoin to be used as a pricing scale for other commodities or as a monetary medium for transactions between other commodities; on the other hand, due to the limited total amount of Bitcoin, it is difficult for Bitcoin to be used as a currency to regulate economic operations.

Therefore, the nature of Bitcoin is not a real currency, but a peculiar financial asset, which itself has investment value. There is a great deal of controversy in the market as to whether Bitcoin is a risky asset or a safe-haven asset. In terms of the huge price fluctuations of Bitcoin itself, it is more like a risky asset. However, in terms of the fact that the price trend of Bitcoin is largely inversely correlated with the trend of the US dollar exchange rate, it is like a safe-haven asset that can hedge against the fluctuations of the US dollar exchange rate.

Additionally, the Chinese government reportedly holds 194,000 BTC, mostly seized from criminal cases, making it one of the world’s largest holders.

Thus, it seems that Bitcoin remains a geopolitical tool for China. Some believe China views BTC as a strategic hedge against the U.S. dollar, even while banning its use domestically. This paradox nonetheless highlights China’s complex stance—publicly anti-Bitcoin but strategically engaged with it behind the scenes.

Dollar-pegged Stablecoins can led to US Dominance, says Zhang from CPI

​Stablecoins have been experiencing significant developments recently with the market cap surpassing $230 Bn on 21 March. Data from DefiLlama indicates that the current total market capitalization of stablecoins currently stands at $230.45 billion, marking an increase of $2.3 billion over the past week. Compared to the same period last year, the stablecoin market cap has grown by 56%.

The US Senate Banking Committee has also passed bipartisan legislation, GENIUS Act, establishing a regulatory framework for stablecoins, signaling a shift toward integrating digital assets into traditional finance.

Among the three digital currencies, the one that may have a significant impact on the international financial system is actually the stablecoin. The US dollar stablecoin not only strengthens the connection between the traditional currency circulation domain and the virtual world currency circulation domain, but also fills the gap in the demand for US dollars by households and enterprises in some developing countries.

Therefore, this digital currency is likely to strengthen the international currency status of the US dollar in the international financial system. Once the US dollar stablecoin links the international credit of the US dollar with the application scenarios of the virtual world more closely, it may greatly consolidate the hegemony of the dollar.

He suggests promote the construction of China’s stable currency. Expand the use of digital tokens on Internet platforms and better combine the sovereign credit of RMB with the global application scenarios of Chinese platforms