A TRADE WAR MISSTEP? CHINA IS VACATING CRYPTO BATTLEFIELD TO US BANKS

Last updated: June 19, 2025, 23:44 | Written by: Barry Silbert

The year is 2025. Why is China forsaking cryptocurrencies at the same time that legacy U.S. banks, long wary of crypto, appear to be discovering its virtues? At the same time that China has declared war on cryptocurrencies, giant American banks appear to be embracing crypto evident the final week of July with the news that crypto firm Lukka will provide State Street Bank s private fund s clients withThe global financial landscape is a complex battlefield, shaped by ongoing trade wars and the contrasting approaches of global superpowers towards the revolutionary world of cryptocurrencies.While the United States, particularly its legacy banking institutions, are cautiously yet steadily embracing the potential of digital assets and blockchain technology, China appears to be moving in the opposite direction, seemingly relinquishing its stake in the crypto arena.This divergence raises crucial questions: Is China's stance a strategic miscalculation in the long-term economic game?Why is China forsaking cryptocurrencies at a time when American giants, initially wary of crypto's volatile nature, are now discovering its inherent virtues and potential applications?This article delves into the multifaceted reasons behind this intriguing shift, exploring the implications for the global financial order, the future of Bitcoin and other cryptocurrencies, and the evolving role of digital assets in a world increasingly defined by economic tensions and technological innovation.The narrative will also explore how tariffs and retaliatory measures between the two nations influence the crypto market and the broader global economy.

The Great Crypto Divergence: China's Retreat

China's relationship with cryptocurrencies has been tumultuous, marked by periods of acceptance followed by stringent crackdowns.By 2025, this has evolved into a virtual ban on all crypto-related activities, from trading and mining to initial coin offerings (ICOs).But what drives this persistent aversion, especially now?

Reasons Behind China's Crypto Crackdown

Several factors contribute to China's stringent stance on cryptocurrencies:

Financial Stability Concerns: The Chinese government views the decentralized and often unregulated nature of cryptocurrencies as a threat to its control over the financial system. While global markets reeled from the US-China trade war, crypto remained unfazed. Was this resilience or detachment? Dive deep into how Bitcoin weathered the tariff storm and its future role in global economics.The potential for capital flight and the disruption of traditional monetary policies are primary concerns.
Control and Surveillance: Cryptocurrencies offer a level of anonymity that clashes with China's extensive surveillance apparatus.The government aims to maintain strict control over financial transactions and data flows.
Central Bank Digital Currency (CBDC): China has been actively developing its own digital currency, the e-CNY. At the same time that China has declared war on cryptocurrencies, giant American banks appear to be embracing crypto evident the final week of July with the news that crypto firm Lukka will provide State Street Bank s private fund s clients with digital and crypto asset fund administration services. This [ ]The government likely sees cryptocurrencies as competitors to its CBDC, hindering its adoption and control.This digital yuan would give the government unprecedented access to transaction data.
Environmental Concerns: While the environmental impact of Bitcoin mining has decreased with the shift towards more sustainable energy sources, concerns remain.In earlier years, China was a major hub for Bitcoin mining, which consumed vast amounts of electricity, often from coal-fired power plants.
Speculative Risks: The volatility inherent in cryptocurrency markets presents significant risks to individual investors. CRYPTONEWSAt the same time that China has declared war on cryptocurrencies, giant American banks appear to be embracing crypto evident the final week of JThe Chinese government has often cited investor protection as a rationale for its regulatory actions.

Furthermore, heightened tensions with the U.S. and the ongoing trade war might exacerbate these concerns.China might perceive cryptocurrencies as a potential tool for circumventing trade restrictions or sanctions, further fueling its determination to control the digital asset landscape.

US Banks Embrace Crypto: A Sea Change

In stark contrast to China's approach, major US banks, after years of skepticism, are increasingly dipping their toes into the crypto waters. Why is China forsaking cryptocurrencies at the same time that legacy U.S. banks, long wary of crypto, appear to be discovering its virtues?This shift reflects a growing recognition of the potential opportunities and the increasing demand for crypto-related services among their clients.

Drivers of US Banks' Crypto Adoption

Several factors are driving this change of heart:

Client Demand: A significant portion of institutional and retail investors are now interested in cryptocurrencies. China is vacating crypto battlefield to US banks Why is China forsaking cryptocurrencies at the same time that legacy U.S. banks, long wary of crypto, appear to be discovering its virtues?Banks are responding to this demand by offering services such as crypto custody, trading, and investment products.
Competitive Pressure: Fintech companies and crypto-native firms have been disrupting the traditional financial landscape.Banks are realizing that they need to innovate and offer crypto services to remain competitive.
Technological Advancements: Advancements in blockchain technology and the development of secure and compliant crypto platforms have made it easier for banks to integrate crypto into their operations.
Regulatory Clarity: While regulatory uncertainty remains a challenge, there is increasing clarity on how banks can offer crypto services in compliance with existing regulations.The evolving regulatory landscape has prompted more cautious optimism.
Potential Revenue Streams: Crypto-related services offer banks new revenue streams, including trading fees, custody fees, and asset management fees.

For example, in July of 2025, State Street Bank partnered with crypto firm Lukka to provide digital and crypto asset fund administration services to its private fund clients. China is vacating crypto battlefield to US banks A trade war misstep? At the same time that China has declared war on cryptocurrencies, giant American banks appear to be embracing crypto evident the final week of July with the news thatThis signals a significant step towards mainstream adoption of crypto by traditional financial institutions. The trade war between the United States (US) and China is heating up, which is threatening to tumble the global markets, including the crypto market. Specifically, the US has announced that a 104% tariff rate on China will begin on April 9, while the Asian country is already making moves to retaliate.Large investment banks are also starting to offer Bitcoin ETFs and other crypto-based investment products to their clients.

The Trade War's Impact on Crypto

The ongoing trade war between the US and China has complex and multifaceted effects on the cryptocurrency market. And if a trade war has broken out between the United States and China, as many believe, why is China turning its back on cryptocurrencies while some of the West s largest financial institutions, long wary of crypto, appear to see fresh value in blockchain-based digital currencies?While crypto is not directly tied to traditional trade flows, it is influenced by broader macroeconomic trends and investor sentiment.

How Tariffs and Trade Tensions Affect Crypto Prices

Here's how the trade war can impact crypto prices:

Risk-Off Sentiment: Escalating trade tensions can lead to a ""risk-off"" environment, where investors move away from risky assets like stocks and cryptocurrencies and towards safe-haven assets like gold and US Treasury bonds. 3.8K subscribers in the AllThingsCrypto community. A sub to discuss cryptocurrnecy.This can put downward pressure on crypto prices.
Currency Fluctuations: The trade war can lead to fluctuations in currency exchange rates, particularly between the US dollar and the Chinese yuan. via Cointelegraph.com News Why is China forsaking cryptocurrencies at the same time that legacy U.S. banks, long waThese fluctuations can influence the perceived value of cryptocurrencies and their attractiveness as alternative stores of value.
Inflationary Pressures: Tariffs can lead to higher prices for goods and services, contributing to inflationary pressures. A trade war misstep? China is vacating crypto battlefield to US banksCryptocurrencies, particularly Bitcoin, are often seen as a hedge against inflation.Therefore, rising inflation can increase demand for crypto and potentially drive up prices.
Geopolitical Uncertainty: The trade war creates a sense of geopolitical uncertainty, which can lead investors to seek alternative assets that are less correlated with traditional financial markets. Welcome! Log into your account. your username. your passwordCryptocurrencies can benefit from this trend.

In 2025, the US announced a significant tariff increase on Chinese goods, prompting immediate retaliation from China. 중국이 암호화폐와의 전쟁을 선포한 것과 동시에 미국의 거대 은행들은 암호화폐를 수용하고 있는 것으로 보입니다.The crypto market reacted with initial volatility, reflecting the broader market uncertainty. cointelegraph.com: Why is China forsaking cryptocurrencies at the same time that legacy U.S. banks, long wary of crypto, appear to be discovering its virtues?Bitcoin, however, showed some resilience, as some investors viewed it as a potential safe haven amidst the turmoil.

The Future of Crypto: A Divided Landscape

The contrasting approaches of the US and China towards cryptocurrencies suggest a potentially divided future for the digital asset landscape.The US, with its more open and innovative approach, could become a global hub for crypto innovation, while China's stringent regulations could stifle the growth of its domestic crypto industry.

Implications for the Global Financial Order

The diverging paths have significant implications for the global financial order:

Innovation and Competition: The US's embrace of crypto could foster innovation and competition in the financial sector, leading to the development of new products and services. China s tariffs vs. US policies: Could Bitcoin prices rise or fall amid the ongoing trade war? See what the future of cryptocurrency looks like. Heightened tensions between the United States and China, characterized by high tariffs, have rekindled the trade war in 2025, sending waves across global marketChina's restrictive approach, however, could limit its ability to participate in this innovation.
Financial Inclusion: Cryptocurrencies have the potential to promote financial inclusion by providing access to financial services for the unbanked and underbanked populations.The US, with its more liberal regulatory environment, could leverage crypto to expand financial inclusion.
Geopolitical Power: The country that dominates the crypto landscape could gain a significant geopolitical advantage.The US, with its strong financial institutions and tech industry, has the potential to become a leader in the crypto space.However, China's development of its CBDC could give it a competing advantage.
Regulatory Fragmentation: The different regulatory approaches of the US and China could lead to regulatory fragmentation in the crypto space, making it more difficult for companies to operate across borders. At the same time that China has declared war on cryptocurrencies, giant American banks appear to be embracing crypto evident the final week of July with the news that crypto firm Lukka will provide State Street Bank s private fund s clients with digital and crypto asset fund administration services.International cooperation and harmonization of regulations will be crucial to address this challenge.

Is China Making a Mistake?Weighing the Pros and Cons

China's decision to essentially ban crypto raises questions about whether they are missing out on potential benefits. crypto markets; eth-bch vs btc; bitcoin price; ethereum price; cardano (ada) price; solana (sol) price; ripple (xrp) price; polkadot (dot) price; dogecoin (doge) price;Let's explore the arguments for and against their approach.

Arguments Against China's Crypto Ban

Lost Economic Opportunity: China is potentially missing out on the economic opportunities associated with the burgeoning crypto industry, including job creation, investment, and technological innovation.
Reduced Competitiveness: China's restrictive approach could reduce its competitiveness in the global financial landscape, as other countries embrace crypto and develop innovative financial products and services.
Black Market Activity: Banning crypto does not eliminate the demand for it. ⁠A trade war misstep? China is vacating crypto battlefield to US banks Why is China forsaking cryptocurrencies at the same time that legacy U.S. banks, longIt simply drives it underground, creating a black market that is more difficult to control and monitor.

Arguments in Favor of China's Crypto Ban

Financial Stability: The Chinese government believes that banning crypto is necessary to maintain financial stability and prevent capital flight.
Control and Surveillance: The government aims to maintain strict control over financial transactions and data flows, which is difficult to achieve with decentralized cryptocurrencies.
CBDC Promotion: Banning crypto could help to promote the adoption of China's CBDC, the e-CNY, giving the government greater control over the digital economy.

Ultimately, whether China's approach is a misstep will depend on its long-term goals and priorities.If the government prioritizes financial stability and control over economic innovation and global competitiveness, then its crypto ban may be seen as a rational decision. Why is China forsaking cryptocurrencies at the same time that legacy U.S. banks, long wary of crypto, appear to be discovering its virtues? At the same time that China has declared war on cryptocurrencies, giant American banks appear to be embracing crypto evident the final week of July with the news that crypto firm MoreHowever, if it values innovation and competitiveness, then it may need to reconsider its approach.

Navigating the Crypto Landscape in a Trade War Era

For investors and businesses, navigating the crypto landscape in a world defined by trade wars and divergent regulatory approaches requires careful planning and risk management.Here are some actionable steps:

Stay Informed: Keep abreast of the latest developments in the trade war and regulatory landscape, as these can have a significant impact on crypto prices and market trends.
Diversify Your Portfolio: Diversify your crypto portfolio across different assets to mitigate risk. At the same time that China has declared war on cryptocurrencies, giant American banks appear to be embracing crypto evident the final week of July with the news that crypto firm Lukka will provide State Street Bank s private fund s clients with digital and crypto asset fund administration services. This follows forays into the cryptoConsider including both established cryptocurrencies like Bitcoin and Ethereum, as well as smaller, more innovative projects.
Use Secure Storage: Store your crypto assets in secure wallets, such as hardware wallets or reputable custody services, to protect them from theft or loss.
Comply with Regulations: Ensure that you are complying with all applicable regulations in your jurisdiction, including KYC/AML requirements.
Consider International Diversification: If possible, consider diversifying your crypto holdings across different jurisdictions to reduce your exposure to regulatory risks in any one country.

Conclusion: A Shifting Paradigm

The juxtaposition of China's retreat from the crypto battlefield and the increasing embrace of digital assets by US banks highlights a significant shift in the global financial paradigm. Why is China forsaking cryptocurrencies at the same time that legacy U.S. banks, long wary of crypto, appear to be discovering its virtues? Please note, this is a STATIC archive of website cointelegraph.com from October 2025, cach3.com does not collect or store any user information, there is no phishing involved.The ongoing trade war adds another layer of complexity, influencing market sentiment and potentially shaping the future of crypto adoption. At the same time that China has declared war on cryptocurrencies, giant American banks appear to be embracing crypto evident the final week of July with the news that crypto firm Lukka will provide State Street Bank s private fund s clients with digital and crypto asset fund administration services. This follows forays into the crypto [ ]Whether China's stringent approach proves to be a strategic misstep remains to be seen.However, the US's more open and innovative approach positions it as a potential leader in the burgeoning crypto space.Ultimately, the future of crypto will depend on the interplay of technological innovation, regulatory developments, and geopolitical forces. China slammed US goods with 34% in additional tariffs. Crypto market watchers remain bullish about the market. Crypto has fallen almost 2% over the past day as traders digest US President Donald Trump s tariffs before pivoting towards China s retaliation.The crypto market remains highly volatile and influenced by numerous factors.For investors, staying informed, diversifying portfolios, and remaining vigilant are key to navigating this evolving landscape.Regardless of the decisions made by individual nations, the underlying technology of blockchain and digital assets will continue to evolve, potentially transforming the future of finance.The crucial takeaway is that the global perspective on crypto assets is diverging, leading to potential risks and opportunities for investors.As the trade war continues and crypto regulations change, awareness and a well-informed strategy are crucial.