The Chinese government, through its media, is continuing to taking aim at cryptocurrency trading and ICO investments. Despite numerous laws passed last year to ban cryptocurrency activity in China, many Chinese investors continue to find underground ways to trade in virtual currencies and invest in ICOs.
Last September, China began its crackdown on virtual currencies, banning ICOs and forcing local exchanges to cease operations. On September 30th, BTCC, the world’s oldest crypto exchange shut its doors, citing orders from regulators to voluntarily close.
At its peak, the Chinese Yuan represented a whopping 90 percent of all fiat currency trades against Bitcoin. That figure has since fallen to a mere 1%. With the concurrent use of regulatory tools to dampen the profitability and viability of cryptocurrency mining in the country, a number of China’s cryptocurrency companies have relocated to crypto-friendly countries like Switzerland and Canada.
However, as unofficial channels have opened up to Chinese crypto-enthusiasts, the government’s measures to curb the Chinese appetite for virtual currencies are proving difficult to enforce.
Chinese citizens are theoretically able to trade crypto assets on offshore exchanges, especially in Hong Kong and Japan. Doing so simply required using a VPN to skirt local regulations.
Other unofficial channels of exchange have also surfaced within China. These include a website known as ‘fire money network’. Traders could buy digital assets from the website through peer-to-peer transactions, funding purchases using Alipay, the popular third-party mobile and online payment platform created by Internet giant Alibaba in 2004.
Chinese media also reports dozens of over-the-counter platforms for trading cryptocurrencies in operation in China, albeit with servers hosted outside the country. The Chinese government is reportedly ramping up efforts to block domestic access to those platforms to completely stamp out cryptocurrency trading.
Popular Chinese search engine Baidu and social media platform Weibo were prohibited from running ICO or crypto ads. Domestically, however, Tencent’s popular messaging apps weixin, (wechat) and QQ have seen a growing number of cryptocurrency trading groups. Wechat users in China have a money transfer function built into the service, allowing them to link their accounts with bank accounts.
China’s intentions are twofold. Some observers suggest the bans on ICOs and instructions to domestic exchanges to shut down are intended to stabilize China’s financial services sector, which is seen as a systemic risk to the Chinese economy.
Another possible reason for the CCP’s public stance on cryptocurrencies is its relative lack of control over the industry. China’s government asserts control over many facets of Chinese life, from media to banking, and many industries are dominated by state-owned enterprises. Furthermore, China’s central bank is trialing its own, state-run cryptocurrency. Such a regulated currency would enhance Beijing’s ability to oversee the activities of China’s 1.3 billion people.
Whether the Chinese government is able to finally shut the doors on unofficial channels of crypto trading remains to be seen. At the moment, their efforts have been effective at the official level, but suspicion remains that many Chinese citizens are finding increasingly sophisticated ways to evade the bans.
Featured image from Shutterstock.
Last modified: March 4, 2021 5:04 PM