Crypto-Regulatory Battle: China 1, USA 0? Examining the Dynamics

In a notable divergence, the correlation between Bitcoin (BTC) and Chinese equities has strengthened in 2023, while its correlation with U.S. equities has experienced a decline.

The cryptocurrency industry has seen a noticeable divergence between Bitcoin‘s correlation with U.S. and Chinese equities. According to digital assets market data provider Kaiko, BTC’s correlation with Chinese equities (CSI 300) strengthened in 2023, while its correlation with U.S. equities (S&P 500) decreased. This was largely due to the U.S. banking crisis of March, which led investors to put their funds in the crypto market and decouple BTC from traditional finance. China, on the other hand, has become a ray of hope for crypto market participants due to its more favorable regulatory landscape.

Crypto 2.0 in China?

The Beijing Municipal Science and Technology Commission recently released a white paper at the Zhongguancun Forum to establish the Chinese capital as a major global innovation hub for the digital economy. Many view this move as a signal that China is reopening its market to the digital assets industry. To achieve this goal, the commission has set aside $14 million. The digital assets industry has warmly welcomed this development, as it has the potential to generate increased investment and open up growth opportunities. Industry experts expect that this move will positively impact the industry by opening up new avenues for businesses to explore.

China’s Shift from Crackdowns to Fostering Web3 Industry

China, once a crypto hub, now focuses on fostering its Web3 industry, deviating from previous crackdowns. In September 2021, China banned cryptocurrency trading and mining, losing its position as the global BTC hub to the U.S. China aims to revive its crypto industry by implementing new regulations and initiatives to support Web3 industry growth. Efforts focus on secure and transparent digital asset trading, mining, and blockchain application development in a regulated environment. With these new measures, China is hoping to regain its position as a leader in the cryptocurrency space.

Opportunity for China to Lead in Blockchain Technology and Digital Finance

The Chinese government has released a white paper on Web3 technology, which has been welcomed by crypto czars. The release coincides with Hong Kong’s new crypto regulations taking effect on June 1st, adding to the interest. Tron founder Justin Sun has called the government’s focus on Web3 “fascinating”. The white paper boosts China’s position in the global crypto market, providing a competitive edge. It could also help China become a leader in blockchain technology and digital finance. The white paper is expected to provide a framework for the development of blockchain-based applications and services. It could also help China become a major player in the global crypto market.

China’s re-entry into the top 10 of Chainalysis’ Global Crypto Adoption Index report for 2022 is notable. Despite slipping to 13th place in 2021, this achievement indicates the ineffectiveness of China’s cryptocurrency ban. The report further suggests that China’s continued crypto adoption could be attributed to the loose enforcement of the ban, indicating that it may not have been strictly implemented.

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