On September 24, 2021, the People's Central Bank of China (PBOC) in a statement declared illegal all financial transactions and services related to cryptocurrencies, including services provided by offshore companies to domestic residents. This decision had a highly negative impact on the stock exchange valuation of securities related to cryptocurrencies and blockchain, such as Bitcoin and Ether.
The PBOC thus intends to avoid the risk of speculative manipulation of the Chinese financial system linked to the high volatility of cryptocurrencies not supported by real value, to reduce the consumption of electricity and CO2 emissions related to the mining of cryptocurrencies and finally has the goal to strengthen the digital yuan, already being tested in Beijing, Shenzhen and Suzhou, in view of a greater digitalization of the economy. The digital yuan, unlike cryptocurrencies, is in fact issued and guaranteed by the PBOC and on a geopolitical level it is a tool to internationalize the renminbi, facilitating its exchange in international payments, especially in the countries adhering to the "Belt and Road Initiative".
The digitalization of the economy is a very widespread monetary policy trend globally. For example, in July 2021 the European Central Bank (ECB) also launched the digital euro project, currently under study for the next 24 months. However, the European Union has not prohibited the use of cryptocurrencies, which are considered to be the provision of services exempt from VAT following a ruling by the European Court of Justice of 22 October 2015 in C-264/14.
A completely distinct approach was adopted by El Salvador, who decided to legalize cryptocurrencies, giving them legal tender like the US dollar. The aim in this case was instead to facilitate access to financial systems, reducing the transaction costs of remittances, since cryptocurrency exchanges are based on peer-to-peer systems not controlled by a central authority.
Avv. Lifang Dong and Avv. Chiara Civitelli
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