Why China had to “Ban” Cryptocurrency but the U.S. did not: A Comparative Analysis of Regulations on Crypto-Markets Between the U.S. and China


The cryptocurrency market grew from a $1.5 billion market capitalization in early 2013 to over $795 billion in January 2018. Bitcoin, an exemplar cryptocurrency, gained value from $0.08 before 2010 to over $17,000 per bitcoin in December 2017. While cryptocurrencies have campaigned for revolutionizing financial transactions, the crypto-market is plagued by nefarious minds, fleecing investors in frauds and Ponzi schemes. This crypto-mania therefore presents numerous legal and regulatory challenges that demand prompt and efficient responses. Nevertheless, the decentralized, anonymous nature of cryptocurrencies magnifies these challenges and has constantly outpaced the law’s ability to respond. To understand the effects of different regulatory strategies, this Note compares regulatory landscapes on cryptocurrency between the U.S. and China.

In a nutshell, while China explicitly banned any exchange or financing activities between fiat money and “coin substitution” in 2017, the U.S. has placed cryptocurrencies within its existing legal labyrinth. What explains the difference and what is its result? Rather than reducing the regulatory variances simply to differences in political ideologies, this Note attempts to explain the reasons behind the two countries’ drastically different regulatory approaches by understanding the regulators’ institutional capacities and objectives. This Note also identifies the interesting impacts of the two countries’ regulatory approach. Namely, China has attempted to substitute the crypto-market with state-led projects and even potential crypto-fiats, while the U.S. regulatory framework has maintained its consistency, but left some areas lawless while others potentially over- regulated.

Part I of this Note introduces the background of cryptocurrency and its technological strengths and weaknesses. Part II surveys the existing regulatory landscapes of the U.S. and China. Part III explains the reasons why the two countries take drastically different approaches in regulating cryptocurrency. Part IV lists comparative strengths and weaknesses between the two regulatory frameworks. Part V concludes and cautiously makes policy recommendations.


China, international law, crypto, cryptocurrency, comparative law, economics, international economics, technology law, computer science law, asia, asian law, chinese law



Rain Xie (Washington University School of Law)



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