Today we had an opportunity of interviewing with Mr. Lv Haitao, an attorney with Beijing Yingke Law Firm in China. Mr. Lv Haitao has the ability and experiences to handle civil and commercial disputes and criminal cases. He has a deep understanding of the e-commerce industry and the blockchain industry in China. Mr. Lv is very familiar with the characteristics of the blockchain technologies, operation modes, profit models, trading modes and applications in China. We are glad to inquire his opinions on the development of cryptocurrency and blockchain technology in China.
CryptoChinaBlog: Mr. Lv, how long have you been working on cases that relate to cryptocurrencies and blockchain? What is the current status of cryptocurrency business and market in China?
Mr. Lv: I started learning about cryptocurrency in 2014, started working on the blockchain industry and related legal issues from 2015, and I noticed and issued a warning about chaotic virtual currency industry in China a while ago. At present, China’s crpytocurrency business has completely halted. Many companies are waiting for the authority to develop a new set of rules and legislation. Some simply have moved their business bases and trading activities offshore to other countries.
Do the executive order issued by the 7 national agencies on the financing risk of crypto issuance affect the operation and development of cryptocurrency business in China?
Mr Lv: The Announcement on Prevention of Financing Risk of Coin Issuance promulgated by the People’s Bank of China (CNNIC), the Ministry of Industry and Information Technology, the State Administration for Industry and Commerce (CBRC), the China Securities Regulatory Commission (CSRC) and the China Insurance Regulatory Commission (CIRC) prohibits the issuance, distribution and use of virtual currency. It also promulgated rules prohibiting exchanges from conducting virtual currency transactions and shutting down all domestic virtual currency exchanges. Therefore, the current development of cryptocurrency in the country is at a standstill. The holders of cryptocurrency are waiting for the introduction of new policy, or through various channels to trade in foreign exchange platforms. Many people have not been active since the new announcement was issued. The Business Management Department of the People’s Bank of China issued a notice in early 2018 to clarify that its branches are forbidden to provide services for cryptocurrency transactions; and they are taking effective measures to prevent payments for cryptocurrency transactions. The regulatory situation is becoming increasingly stricter.
Can Bitcoin be traded in China now? Some Chinese companies now continue to operate its crypto business in Japan, what do you think such move?
Mr. Lv: Bitcoin is no longer able to be traded in China. The Chinese authority have taken note of Chinese operations moving offshore, and is preparing to introduce specific policy requirements. However, from the perspective of China’s strict supervision of the virtual currency, this kind of overseas establishment and operation for domestic Chinese users are also considered illegal. As such, operations targeting Chinese users who conduct transactions that involves the flow of funds, settlement of transactions and other issues, will affect China’s financial stability and should also be prohibited.
Blockchain has also gained increasing attention from large-scale enterprises and financial institutions in China. What do you think about the future development in this area?
Mr. Lv: I am optimistic about the prospects for the blockchain industry. Blockchain industry promotes “decentralization” with advantages of unique storage, encryption, distribution, and it is a total new and revolutionary technology. I often advise my corporate clients to conduct pragmatic research based on applications, develop new products, enhance the user experience, rather than focusing on virtual currency itself. The applications of blockchain technology has an immense potential in China.
For cryptocurrencies and tokens, overseas markets are very hot and most countries are developing new oversight regulations. How is China’s management and legislation prospects for cryptocurrency?
Mr. Lv: China is a country that strictly controls the financial system and flow of money. Since cryptocurrencies may affect the stability of Chinese currency, and impact the monetary system, and may also involve criminal activities such as money laundering and illegal fund-raising, I estimate that the oversight and management of such business will not relax soon. I am not optimistic in the long run.
Legal services in this area are relatively new. Are there any professional committees established with Yingke Law Firm in this area?
Mr. Lv: Yingke Law Firm does not yet have a professional committee in this field. Although some lawyers are more interested in this business, there are not many lawyers who truly understand the virtual currency and understand the basics, technical characteristics and operation mode of the blockchain industry. The development of the domestic blockchain industry is not very standardized, there has been no special laws and regulations in place. Because the lack of governmental oversight and guidance, the market was led by untruthful publicity and misinformation. There are many illegal capital raising scams in the marketplace and the basic and real application of blockchain technology is still rare.
How do Chinese people view the emergence of cryptocurrencies such as bitcoin? Does cryptocurrency have an impact on Chinese banking industry?
Mr. Lv: Many Chinese people are more concerned about the wealth effect of cryptocurrencies, Very few people have a real understanding of the blockchain technology; for the application of cryptocurrency in the domestic market, I think ordinary people have no problem with it because the electronic payment China is very popular, digital money or virtual currency has great advantages in convenience, speed and so on. However, based on the Chinese current regulatory situation, I am afraid that the future development of cryptocurrency in China will not be smooth. From the government’s regulatory perspective, at least the they think it would impact China’s banking sector, crptocurrency trading has to be stopped at least for now.
Background of Yingke:
Yingke Law Firm is a global law firm from China, Yingke aims to serve the world with “one-stop” legal and commercial services. Yingke Law Firm, a leading law firm in China, was established in 2001 with its headquarters in Beijing. Today, the law firm has 46 domestic branches and 24 member law firms of Yingke Global Legal Alliance – located in key financial, business and regulatory centers in Asia, Europe, South America and North America.