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What is happening with China and its approach to crypto?
Last year's industry-wide meltdown has dogged Asian companies as they cautiously plan their recovery. China was once a hotbed for crypto mining and trading. Even after announcing a blanket ban on all digital asset activity more than a year ago, there is reason to believe that the country could make a comeback in this space. Tron founder Justin Sun, who has hyped the industry in the past, also said China could turn to the asset class, especially after imposing a tax on crypto transactions, which he sees as "a big step towards cryptocurrency regulation." Taxation of Crypto Some Chinese...
What is happening with China and its approach to crypto?
Last year's industry-wide meltdown has dogged Asian companies as they cautiously plan their recovery. China was once a hotbed for crypto mining and trading. Even after announcing a blanket ban on all digital asset activity more than a year ago, there is reason to believe that the country could make a comeback in this space.
Also Tron founder Justin Sun, who has hyped the industry in the past said China could turn to the asset class, especially after imposing a tax on crypto transactions, which he sees as “a big step towards cryptocurrency regulation.”
Taxation of crypto
Some Chinese authorities have started imposing a 20% income tax on the investment profits of individual crypto investors and Bitcoin miners. In an attempt to control crypto tax, many believe that China could actually legalize the asset class.
Crypto-related activities are illegal, which hinders tax policy. To get around this, similar discussions have taken place in the past. Months after the ban, a subsidiary of the state tax authority in China published an article focused on “avoiding tax risks through virtual currencies.”
In fact, Chinese blockchain reporter Colin Wu said Huobi and other exchanges provided information to Chinese tax authorities in January 2022, before it was acquired by Sun.
Aside from the FTX debacle, policymakers in the East Asian country have been vocal about concerns such as crypto mining's wasteful energy footprint as well as the dangers of speculating in volatile assets. Crypto activity has largely slowed but is far from dead, suggesting that Beijing-imposed trading restrictions have largely been circumvented by determined users.
Chainalysis' revealed that China moved up to 10th place in the company's Global Crypto Adoption Index in 2022 after noticing strong usage of centralized services. This proved that the government's move was "either ineffective or loosely enforced."
Hong Kong and Singapore's stance on crypto regulation
China's crypto ban raised fears of a domino effect. But Hong Kong and Singapore are going their own way.
Hong Kong has welcomed crypto firms to maintain its status as an international financial center with regulatory clarity. Virtual asset service providers wishing to operate in the region must undergo a licensing process that complies with AML guidelines and investor protection laws.
Hong Kong's Securities and Futures Commission (SFC) will soon publish a list of crypto assets open to retail traders in an effort to limit retail investors to some whitelisted cryptos.
Meanwhile, regulations in Singapore are expected to become stricter for existing market participants, particularly after the high-profile implosion of companies registered in the city-state such as Three Arrows Capital (3AC) and Terraform Labs.
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