China has taken a small step towards cryptocurrency regulation with the implementation of a 20% tax on crypto transactions. This signals that the country is slowly reevaluating its hostile stance towards crypto. 

The news is based on a report by a Chinese technology journalist, who report that Chinese tax authorities had been probing the revenues of Chinese 'whales’, to tax their income. According to Tron founder Justin Sun, this is bullish news for crypto adoption in China. This new engagement by tax authorities should boost cryptocurrency adoption in China “as it provides a clear regulatory framework for individuals and businesses.”

China flip flopping on mining

In May 2021, China surprised the crypto world by banning Bitcoin mining. The ban itself was not newsworthy: it was the umpteenth time they had announced one. No, the real shocker came when it became clear that the country enforced the ban. Chinese-based miners packed their equipment and spread out across the globe. The United States mining industry grew a lot as a result.  

Still, research revealed that one year after the mining ban, still 21% of global mining power came from China. Apparently, a lot of miners had gone underground, possibly bribing local officials. It demonstrates the incentives that will always go against a ban, namely the income - in the form of either bribes or taxes - that can be gained by allowing crypto. Which country likes to see an entire industry, which attracts a lot of young talent, go abroad?

Conclusion: nation-state bans are tough to maintain

Certain nation states and crypto... it feels like a constant stream of ban and un-ban news. China is not the only large country which has been flip-flopping their stance on crypto throughout the years. Also, India and South Korea have had a lot of trouble defining their stance. The take-away is that a prolonged and enforced blanket ban on crypto by any country is unlikely.

After all, even an authoritarian state like China in the end doesn't care to enforce it. That doesn't mean China will put BTC on its Central Bank balance sheet. But it makes it rather likely that crypto can have a marginal but legitimate existence, even in countries that are anti.