Chinese Underground Crypto Market Flourish Despite Strict Government Bans

In defiance of Beijing's crypto trading ban implemented in 2021, an undercover market is reportedly flourishing in China.

The Wall Street Journal (WSJ) recently disclosed that investors are sidestepping the country's strict regulations through informal networks facilitated by VPNs, social media channels, and physical trading.

Circumventing Regulations Through Unconventional Channels

China stands out as one of the most rigorous regions globally regarding crypto trading. Despite the authorities actively pursuing individuals involved in the sector, which often leads to detentions, fines, and imprisonment, WSJ's report suggests that this has not dissuaded specific Chinese traders.

Ben Gagnon, Chief Mining Officer at Bitfarms, shed light on the region's discreet resurgence of crypto mining. This revival is reportedly attributed to using energy capture technology in residential housing.

Ingenious Tactics to Maintain Crypto Transactions

According to Chainalysis data cited by the Journal from an October report, Chinese traders received a net of $86 billion from crypto transactions between July 2022 and June 2023. Their trading volume on Binance reportedly averaged around $90 billion monthly.

According to Crypto Slate, some Chinese traders allegedly retained access to accounts on foreign crypto exchanges established before the ban. They employ virtual private networks (VPNs) to obscure their locations, bypassing geo-restrictions.

The report also indicates that traders in China utilize social media platforms such as WeChat and Telegram for crypto trading activities, presumably engaging in peer-to-peer transactions within dedicated groups on these platforms.

Physical trades are said to be prevalent, particularly in inland cities like Chengdu and Yunnan, where enforcement is comparatively lax. Traders reportedly convene in public spaces like cafes or laundromats to exchange crypto wallet addresses or conduct transactions using cash or bank transfers.

According to Be In Crypto, despite its past as a thriving crypto trading and mining hub, China remains steadfast in its stringent stance against crypto. While the country advocates for blockchain applications in digital identities, livestock tracking, and luxury product authentication, it insists on predominantly using private blockchains rather than the decentralized ledgers typical of web3.

The persistence of crypto trading in China underscores cryptocurrencies' decentralized and global nature. It is a real-world example of governments' challenges in regulating blockchain-based digital assets. Nevertheless, China continues its efforts to tighten control over crypto usage.

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