China makes using cryptocurrency a crime – again

In the Middle Kingdom DeFi is seen as defiance, not delightful disruption


China has again cracked down on cryptocurrencies – this time with a Supreme People's Court ruling that paves the way for criminal prosecution of those who conduct cryptocurrency transactions.

The Thursday ruling by the court centers on "illegal fund raising." In China that term refers to raising money by non-conventional means – such as peer-to-peer lending, crowdfunding, or otherwise working on the fringes of the mainstream financial system.

The new ruling expands the definition of illegal fundraising to include transactions in virtual currencies, meaning crypto-coin miners, traders, and speculators now face lengthy jail terms and substantial fines. It follows a warning issued last week that the metaverse – whatever it is – must not become a source of illegal fundraising.

The effect of the ruling is to give Beijing an extra tool with which to enforce its bans on cryptocurrency which, as The Register has reported, were issued in September 2021, June 2021, May 2021, February 2018, September 2017, and December 2013, at least.

Beijing's hostility to crypto-money and decentralized financial services is founded in the bedrock principle of Chinese politics: the Chinese Communist Party does not share power. Anything and anyone that challenges central control is brought to heel so it can be closely supervised.

Which is why Beijing nixed the IPO of Alibaba's financial services business, Ant Group: its peer-to-peer lending offerings were seen as too difficult to control for Beijing's liking. Alibaba founder Jack Ma criticized the cancellation of the listing and disappeared from public view, ceasing his usual round of speeches and promotion of internet culture and entrepreneurialism. Doing so meant a potential rival for the Party – even if only as a source of inspiration – was effectively deplatformed.

Beijing was so concerned about Ant Group that in recent weeks it required other big tech companies to reveal any entanglements they have with the financial services firm. News of that probe has seen the share prices of China's tent-pole tech companies take nasty tumbles in the last week. China's leaders know that will mean some investor pain, but they're willing to wear it for the greater good.

Yesterday's crypto-related ruling therefore shows, once again, that China is a land in which decentralized finance – often styled as DeFi in the West – is seen as defiance that won't be tolerated. ®

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