China Turns Up the Heat: What Beijing's New Online Marketing Rules Actually Mean for Crypto
China's new crypto marketing rules hit platforms and influencers, boosting its digital yuan. More bureaucratic than past bans, this crackdown may prove more durable. Global industry, take note.
The Chinese government recently released a new set of internet marketing regulations that will affect the cryptocurrency industry. The new rules, which went into effect this month, tighten existing laws on how financial products can be marketed online; however, there is also language in the new regulations that explicitly states that digital assets (cryptocurrencies) are included in the restrictions on financial products marketed online.
This is not the first time China has cracked down on cryptocurrency; however, there is something different about this latest wave of regulations. Unlike previous actions taken by the Chinese government against cryptocurrencies (i.e., banning cryptocurrencies in China), these new restrictions are more methodical and bureaucratic in nature. They also affect more types of financial products than previous regulations did; therefore, it is likely that these restrictions will have a longer-lasting effect on the market for cryptocurrencies than earlier regulations did.
What the Rules Actually Say
In addition, the new regulations deal with internet marketing channels like livestreams, short-form video apps, influencer content, and social media posts that provide greater clarity on what constitutes illegal financial promotion. Included in that category is all crypto and virtual asset-related content; as such, platforms that host such content are now subject to enforcement, not just the individuals posting the content.
This is a shift from past practices, where enforcement was often splintered. Individuals could post positive Bitcoin content, while the platform looked the other way, and regulators would pursue action against the individual. Now, however, enforcement will be higher up the chain and platforms will not wish to have this type of exposure, so there will probably be a lot of content being quietly removed from Chinese social networks well in advance of any enforcement action.
Why This Keeps Happening
China's relationship with cryptocurrency isn't easy to paint in broad strokes, but any attempt will have a tendency to oversimplify. In 2021, China imposed an outright ban on crypto trading (as well as an effective ban on crypto-mining), but that does not mean that Chinese interest in cryptocurrencies vanished; it just relocated. Chinese citizens were still able to access the crypto market through the use of VPNs, offshore exchanges, and peer-to-peer trading networks. Demand for cryptocurrencies has therefore found a number of alternative channels.
The new rules around marketing are not intended to completely eliminate the popularity of cryptocurrencies; they have more to do with how accessible promotion and information about cryptocurrencies are. If it is difficult for citizens to find other people promoting or using cryptocurrencies, it makes anyone considering using cryptocurrencies feel isolated and as though they are taking on more risk. This makes sense in the context of the government's digital currency initiative, the digital yuan. As the state removes decentralized options for trade and commerce, the government can position its digital yuan as a viable alternative.
Clearly, these two policy issues — the regulation of cryptocurrencies and the development of the digital yuan — are related. That doesn't make it a conspiracy — it is simply common sense.
What It Means for Regular People in China
The restrictions you currently have are only going to increase if you reside in China and have been watching cryptocurrency; the new regulations will not suddenly put anyone in prison for using digital assets. However, you will also find it very difficult to continue receiving accurate information on cryptocurrency since many influencers who walked the grey line will probably stop talking about cryptocurrency, while most providers will over-enforce their rules to prevent penalties.
The practical implications of this are that if you're living in mainland China you are going to find it increasingly difficult to stay up-to-date with all things related to cryptocurrency; it is still possible to do so, just more challenging.
What the Global Crypto World Is Getting Wrong About This
Some parts of Twitter are treating the news as an equivalent of "Banning of Bitcoin" in China — but the implication here is either — "let's panic," or "it doesn't matter as China has already banned nearly all else anyway." Neither view (panic or nonchalance) seem to be accurate.
For one — these are not new exchanges that are being closed down based on this news; they are not the same type of events as the "asset seizure" stories we have been hearing about. Therefore no large price movements will likely occur only based on what happened.
However — failing to accept these things as important does not really address the issue with what this means for China having that many people that have interest in the crypto space. Despite China's 2021 crypto ban, an estimated 59 million Chinese citizens are still using crypto, making it the world's second-largest crypto user base after India. Over an extended period of time — the lack of information/value will have a material impact on China's people, irrespective of when we see it manifest itself or how quickly.
The Broader Pattern Worth Watching
There is increased sophistication among global regulatory bodies when it comes to cryptocurrency. For example, previous broad-based bans on cryptocurrency are being replaced by regulations that are increasingly targeting specific issues (e.g. how to access cryptocurrency markets, marketing practices for cryptocurrencies, institutions that participate in cryptocurrency buying/selling), rather than banning the technology itself. China is leading this charge compared to other countries.
Through what Beijing is creating now, i.e. legislative regulations for the development of an ecosystem for cryptocurrency to exist legally only as a controlled instrument of the state, everything else will be essentially rendered invisible, though not necessarily illegal. This approach towards creating an ecosystem for cryptocurrencies to exist as a controlled form of state-by-state currency will be a more sustainable method than simply banning it outright, with many countries observing and learning from this process.
This Isn't the Last Move
Nobody should expect this to be the final word. China's regulatory posture on crypto has always been iterative. New rules come out, enforcement happens unevenly for a while, and then the next round of rules tightens things further. The direction of travel has been consistent for years.
For the broader industry, the message is familiar but worth repeating: markets that depend heavily on Chinese retail participation carry real regulatory risk. That's not new. But every time Beijing adds another brick to the wall, it's worth actually looking at the wall.
