Despite a severe ban on cryptocurrency trading imposed by Beijing in 2021, a growing underground market continues to operate in China. This phenomenon highlights the decentralized and global nature of cryptocurrencies and highlights the difficulties faced by governments in regulating blockchain-based digital assets.
Bypassing crypto regulations: VPNs and social media
Chinese investors are circumventing the country’s strict regulations by using informal networks, notably VPNs and social media. Platforms like WeChat and Telegram serve as meeting points for buying and selling cryptocurrencies, often on peer-to-peer. 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 common, particularly in inland cities such as Chengdu and Yunnan, where surveillance is less severe. Traders will often meet in public spaces to exchange crypto wallet addresses or conduct transactions via bank transfers or cash. Despite the risks of detentions and fines, Binance’s transaction volume reaches approximately 90 billion dollars per month, according to data from Chainalysis.
The use of blockchain in China
Although China was once a major hub for cryptocurrency trading and mining, its position remains steadfast against cryptos. The country advocates for the use of blockchain for applications such as digital identities, livestock tracking, and luxury goods authentication, favoring private blockchains over the decentralized ledgers typical of web3.
The persistence of cryptocurrency trading in China is a clear example of the decentralized and global nature of cryptos and highlights the difficulty for governments to control blockchain-based digital assets. This situation serves as a warning for other jurisdictions seeking to impose similar bans.
