Underground Crypto Trading Flourishes in China Despite Strict Ban, Reports WSJ

Even after Beijing imposed a prohibition on cryptocurrency dealings in 2021, reports indicate a resilient clandestine market remains in effect throughout China. According to a publication by The Wall Street Journal (WSJ), investors are sidestepping the nation’s harsh restrictions by forming informal networks that utilize VPNs, social media, and direct transactions.

In the realm of cryptocurrency, China is known for its rigorous regulations. The government is vigilant in tracking down individuals tied to the crypto market, imposing penalties ranging from fines to incarceration. Nonetheless, as highlighted by the WSJ, these severe measures have not entirely quashed the spirit of certain Chinese investors. Additionally, Ben Gagnon of Bitfarms, during an interview, pointed out a stealthy resurgence of crypto mining in China facilitated by novel energy capture technologies in domestic settings.

Quoting figures from Chainalysis, the Journal noted in an October report that between July 2022 and June 2023, Chinese participants netted about $86 billion in cryptocurrency transfers. Their transactions on the exchange Binance hovered close to a striking $90 billion each month.

A number of Chinese investors reportedly cling to active accounts on international cryptocurrency exchanges that were established pre-ban, using VPNs to conceal their physical locations. This tactic enables them to skirt online regional restrictions. Moreover, the Journal conveyed that these traders leverage social media networks such as WeChat and Telegram to execute crypto transactions, seemingly on a peer-to-peer basis. They utilize specific groups within these platforms to connect with potential buyers and sellers, thereby avoiding centralized exchanges.

Engaging in direct physical transactions is also a common strategy, especially within interior municipalities such as Chengdu and Yunnan, where oversight is comparatively lenient. The Journal mentions that traders often congregate in public venues like coffee shops or laundromats to swap details of crypto wallets or to carry out trades via cash or bank transfers.

Though once a stronghold for crypto commerce and mining, China continues to adopt an unyielding posture with regard to cryptocurrencies. The Chinese government supports the use of blockchain technology for a variety of applications, such as digital identification, monitoring agricultural stock, and certifying high-end goods. However, in contrast to the decentralized ethos of web3, the country’s preference has largely been for privately-operated blockchains.

Irrespective of prohibitive measures, cryptocurrency trading in China endures, demonstrating the inherently decentralized and international character of such assets and illustrating the complexities governments face when trying to rein in blockchain-based financial activities. Still, efforts to suppress the use of cryptocurrencies persist within China.