Despite the prohibition of cryptocurrency trading in 2021 by the Chinese government, reports indicate an active black market in the country. According to a Wall Street Journal (WSJ) article, investors are navigating the stringent regulations through informal networks, utilizing social media, VPNs and in-person trading.
China is a region that has some of the strictest regulations in the world regarding cryptocurrency trading, with authorities vigorously pursuing those involved in the sector. Perpetrators face the threat of arrest, penalties or jail time. But according to the WSJ, some Chinese dealers have not been deterred by these actions. Additionally, Ben Gagnon, chief mining officer of Bitfarms, noted that energy-capture technologies in Chinese residential dwellings have enabled a quiet comeback to cryptocurrency mining in the country.
Citing an October report from Chainalysis, the WSJ revealed that Chinese traders made a net profit of $86 billion from cryptocurrency transactions between July 2022 and June 2023. Further, an estimated $90 billion was traded on Binance per month on average.
Reportedly, Chinese traders are still able to access accounts on foreign cryptocurrency exchanges that were created before the ban by using VPNs to mask IP addresses and get around georestrictions. Furthermore, peer-to-peer cryptocurrency trading is purportedly conducted on social media sites such as Telegram and WeChat. Traders can locate sellers and buyers on the platforms by joining specific groups, thus eliminating the need for crypto exchanges.
In-person trading is also widespread, especially in inland areas such as Yunnan and Chengdu, where enforcement is more lenient. Traders frequently gather together in public places such as laundromats or cafes to swap cryptocurrency wallet addresses and carry out bank or cash transfer transactions.
Additionally, traders are taking advantage of Hong Kong’s welcoming attitude toward digital assets by depositing funds into cryptocurrency accounts there using their annual quotas of $50,000 for foreign exchange purchases. Some observers surmise that officials, aware of the market’s considerable potential for disruption as well as its substantial opportunities, deliberately encourage cryptocurrency trading in Hong Kong as a trial run for any changes in the government’s stance on digital assets.
Despite its past as a major center for cryptocurrency trade and mining, China continues to have a strong position against cryptocurrencies. The nation supports blockchain technology when it comes to livestock tracking, digital IDs and luxury product authentication, but it is more interested in private blockchains than in the decentralized ledgers that are common in web3.
The environment surrounding crypto trading is constantly changing as Chinese investors continue to flout the ban. The idea that China’s participation in the cryptocurrency industry has decreased as a result of the prohibition is called into question by the tenacity of investors, innovative tactics and a developing market in Hong Kong.
The tenacity of the traders in China shows how much people around the world are coming to appreciate the benefits they can reap from working with industry companies, such as Bit Digital Inc. (NASDAQ: BTBT).
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