Despite a tough ban on cryptocurrency trading imposed by Beijing in 2021, a thriving underground market continues to operate in China. This phenomenon highlights the decentralised and global nature of crypto-currencies and highlights the difficulties faced by governments in regulating blockchain-based digital assets.
Bypassing crypto regulations: VPNs and social media
Chinese investors bypass the country’s strict regulations by using informal networks, including VPNs and social media. Platforms such as WeChat and Telegram are used as meeting points for buying and selling cryptocurrencies, often on a peer-to-peer basis. This method allows traders to bypass geographical restrictions and maintain access to accounts on foreign exchanges established before the ban.
Physical exchanges and trader resilience
Physical exchanges are also commonplace, particularly in inland cities such as Chengdu and Yunnan, where surveillance is more lax. Traders often meet in public spaces to exchange crypto wallet addresses or carry out transactions via bank transfers or cash. Despite the risks of detentions and fines, the volume of transactions on Binance reaches around $90 billion per month, according to Chainalysis data.
The use of blockchain in China
Although China has been a major centre for cryptocurrency trading and mining, its stance remains unwavering against cryptos. The country advocates the use of blockchain for applications such as digital identities, livestock tracking and luxury goods authentication, favouring private blockchains over the decentralised registries typical of the web3.
The persistence of cryptocurrency trading in China is a concrete example of the decentralised and global nature of cryptos and highlights the difficulty for governments to control blockchain-based digital assets. It serves as a warning to other jurisdictions seeking to impose similar bans.
