In an era where cryptocurrency is reaching unprecedented levels of success, many people are exploring crypto wallet apps and investing in the blockchain for the first time, and both financial and government institutions are taking notice of decentralised finance, China is the most prominent odd one out.
The People’s Republic has banned cryptocurrency trading since 2017, has cracked down on the use of foreign exchanges to get around the ban since 2021 and has tightened the rules further as of the very start of 2025 as stablecoins were used as forex intermediaries when trading the Chinese yuan.
Given that other countries around the world are either looking into more solid regulation of cryptocurrency or welcoming it with open arms, with El Salvador and the United States poised to do the latter, this is somewhat unusual, and time will tell of its effect on the market as a whole.
However, what makes this interesting and indeed somewhat ironic is not just that until the sweeping crackdowns of 2021 China was arguably the world leader in Bitcoin mining, but also that the country was one of the foremost pioneers in the world of cryptocurrency, even before it was technically cryptographic.
In the Western world, the first successful digital currency was e-gold, which resembled a form of commodities trading far more than even a modern cryptocurrency, let alone a fiat currency. Other attempts to create online currencies such as Flooz and Beanz were outright disasters.
However, one of China’s most popular social media sites innovated one of the first successful stablecoins in existence and created a firestorm of controversy in the process.
The Question Of QQ Coin
Developed and launched by Chinese conglomerate Tencent, QQ initially launched as an instant messaging service based on the then-popular service ICQ but then evolved into a prototypical social media super-app which offered support for blogs, avatars, games, music, shopping, cloud storage and online dating.
It was an all-in-one released and successful years before a lot of the internet in the western world migrated to platforms such as Myspace and Facebook.
In 2002, Tencent released the QQ coin as a form of in-app currency closer in spirit to V-Bucks from Fortnite or Gold from World of Warcraft than Tether or USDC, and its main purpose was to allow the teenage and young adult audience of QQ to buy virtual goodies such as ringtones and accessories for avatars.
They were available for free to people who did well at some of QQ’s games in a prototypical form of the play-to-earn model (although QQ was far from the first to do this), but were instead primarily bought at an exchange rate of one QQ coin for one yuan ($0.14).
This was not necessarily a problem by itself if the products remained within the world of QQ, but due to the relatively open nature of QQ Coins and the ability to transfer them to other users, it started to take on a life of its own.
It started with other online game sites in China, but quickly spread beyond that into full-on exchanges where QQ was traded not only for virtual assets but real ones as well. According to media sources, CDs and makeup were purchased using the QQ Coins.
It had, rather surprisingly, become a parallel economy which worked in a way that was remarkably similar to cryptocurrency, and by 2007 the People’s Bank of China noticed a serious potential problem and led a crackdown.
The argument, similar to ones surrounding real money trading in other online video games, was that by allowing QQ Coins to be traded for real money, the service could be vulnerable to more illicit uses.
In a Chinese context, this includes workarounds for the country’s extremely strict anti-gambling laws but also includes the potential for money laundering. This, incidentally, was the exact same issue that led to the end of e-gold in the United States.
However, unlike e-gold, which was always meant to be a form of currency effectively based on the gold standard, QQ Coins were never meant to be used as a virtual currency according to Tencent themselves and did respond by limiting the rates at which users could transfer coins or win them through games.
In some respects, this crackdown was somewhat unfortunate, as Tencent had accidentally created the underpinnings of a digital currency and economy, although there is the question of whether it would have survived a major, concerted scaling-up process.
Ultimately, what it proved was that there was very much a market for digital currency and the flexibility it provided, to the point that when Meta proposed the stablecoin Libra, many Chinese commenters noted its similarity to QQ Coin, as well as services such as WeChat and Alipay.