Our understanding of emerging technologies is often shaped by the policies and regulations that govern them. Without staying updated on new regulatory developments, our perception can easily become stagnant or outdated. For many non-practitioners, terms like "Bitcoin" and "blockchain" still evoke skepticism, often associated with speculation and perceived as having little practical value.
This article explores the evolution of blockchain technology through the chronological development of mainland China's policy documents. From defining new concepts to outlining future development paths, we'll examine key regulatory milestones that have shaped this transformative technology.
The Initial Regulatory Framework: Bitcoin's Arrival
When Bitcoin emerged from the technical community's "Bit Island" [1], its novel concept sparked interest and speculative activities in China. To protect public property rights, maintain the legal status of the Chinese yuan, prevent money laundering risks, and ensure financial stability, five governmental agencies jointly issued "The Notice on Preventing Bitcoin Risks" on December 3, 2013.
This foundational policy document首次 defined Bitcoin's nature, stating that it "is not issued by monetary authorities, does not possess legal tender status, and should not be used as currency in markets." However, it recognized Bitcoin as "a specific virtual commodity" that ordinary citizens could freely participate in trading, provided they assumed the risks themselves.
The notice restricted financial institutions and payment organizations from engaging in Bitcoin-related businesses, strengthened management of Bitcoin websites, and emphasized public education about monetary knowledge and investment risks. This early framework brought Bitcoin into public awareness while establishing important risk warnings.
Expanding Regulations: Addressing ICOs and Virtual Currencies
On September 4, 2017, seven government departments released "The Announcement on Preventing Risks from Token Issuance and Financing". This document addressed fundraising activities through token issuance, including Initial Coin Offerings (ICOs), to protect investor rights and prevent financial risks.
It defined "token issuance financing" as activities where "fundraising entities raise so-called 'virtual currencies' such as Bitcoin and Ethereum through illegal token issuance and circulation." The announcement characterized these activities as "essentially unauthorized illegal public fundraising behavior," potentially involving illegal security issuance, fundraising, financial fraud, and pyramid schemes.
This policy expanded beyond Bitcoin to encompass broader "virtual currency" definitions and constraints on illegal public fundraising activities using digital assets.
Blockchain Technology Gains Recognition
Approximately a year and a half later, traditional internet companies began recognizing the potential of blockchain technology—the foundation behind Bitcoin—and started deploying their own blockchain initiatives.
To standardize blockchain information services, the Cyberspace Administration of China passed "The Blockchain Information Service Management Regulations" on January 10, 2019. These regulations defined key terms:
- Blockchain information services: Information services provided to the public through websites, applications, etc., based on blockchain technology or systems
- Blockchain information service providers: Entities or nodes providing blockchain information services to the public, plus organizations providing technical support
- Blockchain information service users: Organizations or individuals using blockchain information services
This framework established compliance guidelines for the emerging blockchain industry, encouraging self-exploration while establishing self-regulatory systems and industry standards for healthy development.
National Strategic Importance: The 14th Five-Year Plan
By 2021, blockchain technology had risen to national strategic importance as an emerging digital industry. The "14th Five-Year Plan (2021-2025) for National Economic and Social Development and Long-Range Objectives Through 2035" released on March 13, 2021, identified blockchain as a key digital economy industry.
The plan called for "cultivating and expanding emerging digital industries including artificial intelligence, big data, blockchain, cloud computing, and cybersecurity," while specifically outlining blockchain development strategies: "Promoting innovation in blockchain technologies such as smart contracts, consensus algorithms, encryption algorithms, and distributed systems, focusing on alliance chains to develop blockchain service platforms and application solutions in financial technology, supply chain management, government services, and other fields, while improving regulatory mechanisms."
This marked a watershed moment that established blockchain's role in accelerating national digital industrialization strategy.
Industry Development Guidelines
On May 27, 2021, the Ministry of Industry and Information Technology and the Office of the Central Cyberspace Affairs Commission jointly issued "Guiding Opinions on Accelerating the Application and Industrial Development of Blockchain Technology", which首次 provided an official definition of blockchain:
"Blockchain is an important component of the new generation of information technology, a new type of database software that integrates multiple technologies such as distributed networks, encryption technology, and smart contracts. Through data transparency, difficulty of tampering, and traceability, it is expected to solve trust and security issues in cyberspace, promote the Internet's evolution from transmitting information to transmitting value, and restructure the information industry system."
The document also established development targets for two time nodes:
- By 2025: Blockchain industry comprehensive strength reaches world advanced levels, with initial industry scale formation
- By 2030: Blockchain industry comprehensive strength continues to improve, with further expansion of industry scale
These guidelines provided clear direction for blockchain practitioners following the 14th Five-Year Plan.
Regulatory Refinement: Addressing Mining and Trading Risks
With policy expansion came recognition of industry problems. In September 2021, two policy documents were released to standardize the blockchain ecosystem.
On September 3, 2021, the National Development and Reform Commission and other departments issued "Notice on Regulating Virtual Currency 'Mining' Activities", which首次 defined "mining":
"Virtual currency 'mining' activities refer to the process of producing virtual currency through specialized 'mining machine' calculations. These activities consume large amounts of energy and generate significant carbon emissions, contribute minimally to the national economy, and have limited driving effect on industrial development and technological progress. Coupled with the increasingly prominent risks derived from virtual currency production and trading links, their blind and disordered development adversely affects promoting high-quality economic and social development and energy conservation and emission reduction."
The notice addressed these concerns by strictly prohibiting new virtual currency "mining" projects and accelerating the orderly exit of existing operations.
On September 15, 2021, "Notice on Further Preventing and Dealing with Risks of Virtual Currency Trading Speculation" further clarified the essential attributes of virtual currency and related business activities:
- Virtual currencies do not have the same legal status as fiat currency
- Virtual currency-related business activities constitute illegal financial activities
- Overseas virtual currency exchanges providing services to Chinese residents similarly constitute illegal financial activities
- Participating in virtual currency investment activities carries legal risks
This document demonstrated the government's ongoing efforts to remind the public of speculation risks, protect property security, and maintain social stability through clear policy guidance.
Emerging Concepts: Web3 and Internet 3.0
On May 29, 2023, "Beijing Internet 3.0 Innovation and Development White Paper (2023)" introduced the new concept of Internet 3.0 to the public discourse.
The white paper described Internet 3.0 as "a virtual-real integrated three-dimensional space with highly immersive interactive experiences that will greatly improve human-information interaction experiences and economic activity efficiency. High levels of intelligence and virtual-real integrated development will be its main features. The Internet 3.0 category includes virtual-real integrated highly immersive sensory experiences and virtual-real贯通 economic activity experiences, covering the connotations of both元宇宙 and Web3."
This comprehensive document covered emerging concepts including "Internet 3.0," "Web3," "metaverse," and "blockchain technology," providing forward-looking significance for the entire industry's development.
Standardization and Future Development
On December 28, 2023, the Ministry of Industry and Information Technology, the Office of the Central Cyberspace Affairs Commission, and the National Standardization Administration jointly issued "Guidelines for the Construction of Blockchain and Distributed Accounting Technology Standard System", marking further standardization of blockchain industry development.
The document provided a more complete definition of blockchain: "Blockchain and distributed accounting technology (hereinafter referred to as 'blockchain') is an important component of the new generation of information technology, a new type of database software that integrates multiple technologies such as distributed networks, encryption technology, and smart contracts. Blockchain technology has characteristics such as data transparency, difficulty of tampering, and traceability, is expected to solve trust and security issues in cyberspace, promote the Internet's evolution from transmitting information to transmitting value, and will become an important digital infrastructure promoting the rapid development of future industries such as元宇宙 and Web3.0."
The standard system planning established two time nodes:
- By 2025: Preliminary formation of a standard system supporting blockchain development
- By 2027: Comprehensive formation of a standard system supporting blockchain development
Clearly, 2025 represents an important milestone for both achieving initial blockchain industry scale and establishing preliminary development standards.
Recent Developments: Future Industries and Compliance
In 2024, several significant policy developments emerged. On January 18, 2024, seven departments released "Implementation Opinions on Promoting the Innovative Development of Future Industries", which identified "third-generation Internet" as an innovative landmark product:
"Exploring blockchain as the core technology and data as the key element to build the next generation of Internet innovation applications and digital ecosystems. Accelerate software product research and development for the new generation of mobile information networks, brain-like intelligence, etc., encourage demonstration applications of new products, and stimulate information service potential."
The document specifically mentioned promoting third-generation Internet applications in data exchange pilots, exploring uses of blockchain technology to connect data across major industry platforms, researching third-generation Internet digital identity authentication systems, and establishing data governance and trading circulation mechanisms.
Most recently, on August 19, 2024, the Supreme People's Court and Supreme People's Procuratorate jointly held a press conference to release "Interpretations on Several Issues Concerning the Application of Law in Handling Money Laundering Criminal Cases", which took effect on August 20, 2024.
The interpretations specifically included "virtual asset" transactions as a money laundering method, stating that "transferring or converting criminal proceeds and their benefits through 'virtual asset' transactions or financial asset exchange methods can be determined as 'other methods concealing or disguising the source and nature of criminal proceeds and their benefits' as stipulated in Article 191(1)(5) of the Criminal Law."
This development acknowledges that new technologies represent a double-edged sword, requiring continuous standardization to prevent potential harm.
Frequently Asked Questions
What is China's official stance on Bitcoin and other cryptocurrencies?
China does not recognize cryptocurrencies as legal tender. The government regards them as virtual commodities rather than currency, prohibiting financial institutions from handling crypto transactions while allowing individuals to trade at their own risk. The focus remains on preventing financial risks and illegal activities.
How does China view blockchain technology itself?
Unlike its position on cryptocurrencies, China actively supports blockchain technology development. The government has identified blockchain as a strategic emerging technology and has incorporated it into national development plans, encouraging innovation in enterprise applications while establishing regulatory frameworks.
What are the key milestones in China's blockchain policy development?
Key milestones include the 2013 Bitcoin risk notice, 2017 ICO ban, 2019 blockchain service regulations, 2021 inclusion in the 14th Five-Year Plan, and the 2023 standard system guidelines. Each represents evolving understanding and approach to blockchain technology and its applications.
How can businesses legally utilize blockchain technology in China?
Businesses can develop blockchain applications for various industries including supply chain management, financial services (with proper licensing), government services, and enterprise solutions. They must comply with the Blockchain Information Service Management Regulations and register with the Cyberspace Administration of China.
What is the difference between China's approach to cryptocurrencies and blockchain?
China maintains a strict separation between cryptocurrencies (which it largely prohibits) and blockchain technology (which it actively promotes). This distinction allows the government to encourage technological innovation while minimizing financial risks associated with cryptocurrency speculation.
What are the future development targets for blockchain in China?
By 2025, China aims to achieve world-advanced levels in blockchain comprehensive strength with initial industry scale formation. By 2030, the goal is continued improvement in comprehensive strength and further expansion of industry scale, supported by a complete standard system.
Conclusion
The evolution of China's blockchain policy reflects a careful balancing act between fostering technological innovation and maintaining financial stability. From initial cautious approaches to Bitcoin to the embrace of blockchain as a strategic technology, policy developments have progressively clarified the legal environment while addressing emerging risks.
The comprehensive policy framework demonstrates China's methodical approach to technological adoption—first understanding, then regulating, and finally promoting development within established boundaries. This approach has created a environment where blockchain technology can flourish for practical applications while minimizing the risks associated with speculative activities.
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[1] The term "Bit Island" is referenced from Fang Jun's book "Island Blockchain".