China’s Political Elites Call on the Legislature to Legally Define Cryptocurrency as Non-Fiat Currency During the Annual ‘Two Sessions’
Regulation of the cryptocurrency space is still hotly discussed during China’s ongoing “two sessions”, the annual gathering of the country’s legislative and political advisory bodies and its biggest political meetings of the year. Many legislative delegates and political advisers call for clear and strict crypto regulations, according to Securities Daily.
Shi Guilu, a deputy of the National People’s Congress (NPC), China’s legislator and chairman of Shaanxi Rongmin Holdings Group proposes the formulation of virtual currency regulatory framework, urging the legislator to legally define cryptocurrencies as soon as possible.
In his proposal to this year’s NPC session, Mr. Shi suggests Chinese law should define cryptocurrencies as a type of non-fiat money, differentiating cryptocurrencies such as bitcoin from other forms of currencies, and crypto trading platforms should inform their users the difference between virtual currencies and fiat money, preventing the public from irrational investment in cryptos due to their misunderstanding of the virtual currency nature.
Although China’s government has continued to crack down on domestic cryptocurrency trading and token sale events, Mr. Shi says some criminals still conduct illegal fundraising activities under the guise of “blockchain” and “cryptocurrencies”, blockchain and cryptos, using the idea of “financial innovation” to lure naive investors.
He also notes that if cryptocurrency is pegged to fiat money such as the Chinese Renminbi, the issuance of fiat currency may become unrestricted because there is no limitations on the issue of cryptos. Therefore, he advises the government to tighten its grip on the cryptocurrency market.
Mr. Shi is not alone in calling for a regulatory framework for the space. Gong Fuwen, a member of the Chinese People’s Political Consultative Conference (CPPCC), the country’s top political advisory body and vice-president of the Shanxi Higher People’s Court stated in his proposal that digital tokens are different from the digital currency issued by the central bank and cryptocurrency tradings should be totally banned to prevent financial risks .
He proposes the government to regulate the development and transactions of digital tokens using both administrative and criminal means, and adds that the fundraising activities of blockchain projects should be regulated too and those projects are barred from creating hype by using the concept of digital currency and blockchain. If projects raise fund through issuing digital tokens, the tokens should be regulated as private equity securities.
The proposals from political advisers and legislative delegates will have an impact on China’s next move towards cryptocurrency. Undoubtedly, Chinese regulators will step up their pressure on domestic cryptocurrency activity and crack down on pseudo-financial innovations that have no relationship with the real economy.