The Criminalization of Cryptocurrency Operation in China: Limits of Private Money Reconsidered

Hong Kong Law Journal, Volume 23 Part 1 (2023), Pages 403-428.

University of Hong Kong Faculty of Law Research Paper No. 2022/53

23 Pages Posted: 31 Oct 2022 Last revised: 30 Nov 2023

See all articles by Shuping Li

Shuping Li

University of Hong Kong, Faculty of Law

Date Written: July 19, 2022

Abstract

This article examines the governance model and the political economic considerations in the criminalization trend of cryptocurrencies since 2017. Cryptocurrencies are completely banned for threats to the central bank and commercial bank-dominated sovereign monetary system and their policy tasks (such as capital control), for financial stability, market integrity and illegal fundraising concerns, for regulatory cost and capability of identifying and supervising different kinds of cryptocurrencies and their operators. The downside of such a criminalization decision is arguably sacrificing market efficiency and autonomy. Based on the idea that the essence of money is credit, this article then explores the limits of private money operation in China, namely the entry conditions and operational rules on banking and payment institutions. A policy suggestion is that private entities with technological strengths for risk control and infrastructure design should be encouraged to provide banking and payment services. The regulatory rules of commercial banks are applicable to private banks, with bespoke rules applied to nonbank payment institutions. Regulation and supervision of data protection, operational security and digital infrastructure design shall be the focus of legal design in the future.

Keywords: cryptocurrrency, criminalization, financial regulation, political economy, governance

JEL Classification: K23

Suggested Citation

Li, Shuping, The Criminalization of Cryptocurrency Operation in China: Limits of Private Money Reconsidered (July 19, 2022). Hong Kong Law Journal, Volume 23 Part 1 (2023), Pages 403-428., University of Hong Kong Faculty of Law Research Paper No. 2022/53, Available at SSRN: https://ssrn.com/abstract=4255214

Shuping Li (Contact Author)

University of Hong Kong, Faculty of Law ( email )

Pokfulam Road
Hong Kong
Hong Kong

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