Key Takeaways
- Chinese government urges caution around crypto products following Bitcoin rally.
- The country remains one of the largest crypto markets in the world despite banning trading and mining.
- Crypto exchanges such as Binance remain in operation in China.
Chinese state-sponsored media agency, Economic Daily, has renewed the government’s warnings against investing in cryptocurrencies amid bullish market conditions.
Despite a supposed ban on crypto trading and mining in China that came into effect in 2021, the nation paradoxically remains one of the largest digital asset markets in the world. Is crypto really ‘banned’ in China?
Investors Cautioned on Crypto
Coinciding with the astronomical rise in the price of Bitcoin (BTC), Chinese state media has been prompted to issue an advisory to crypto investors and is urging caution.
In 2021 the Chinese government imposed sweeping bans on numerous crypto-related activities, effectively making cryptocurrency illegal in the country. Oddly, the possession of and peer-to-peer (P2P) trading of digital assets like BTC or Ethereum (ETH) weren’t outright banned, and so crypto activity seemed to continue.
The notice highlights the norms of price volatility, macroeconomic uncertainty, unclear regulations, and other risk factors such as hacks and cybersecurity breaches that necessitated this warning. Whilst these matters persist, investors are advised to maintain a “clear head.”
Risk of Exposure?
Highlighting the approval of spot BTC exchange-traded funds (ETFs) in the United States, the article posits that there are ‘concerns’ about this new publicly traded product being sold to mainland residents.
Xiao Sa, partner at Beijing Dacheng Law Firm and a director of the Bank of China Law Research Association attempts to quell these ‘concerns’, stating: “The approval of Bitcoin ETF does not mean that cryptocurrency will make breakthrough progress in a short period of time.”
Reiterating that China effectively banned all crypto activity in 2021, he notes that these products can not be sold to, and are not permitted to be directly purchased by, Chinese residents.
But with all this said, crypto activity remains substantial in China, and this may be the true motivation behind the crypto notice.
Crypto in China
Prior to the ban, China was one of the most active crypto markets in the world and was leading the Bitcoin mining effort by a significant margin. China’s ban on crypto doesn’t seem to have worked, or it is at least changing.
Much of China’s trading crypto activity takes place through over-the-counter (OTC) trading desks or “grey market peer-to-peer businesses” according to Chainalysis. This is certainly highlighted in the billions transacted in OTC markets, largely facilitated by Hong Kong OTC trading desks that are used by both retail and institutional traders
According to reports, the Chinese crypto market saw an estimated $86.4 billion in raw transaction volumes between July 2022 and June 2023, outpacing Hong Kong by over $20 billion.
Thanks to Hong Kong’s unique economic status which is separate from that of China, high-net-worth individuals and institutional investors can interact with crypto. Furthermore, and perhaps most surprisingly, Chinese state-owned businesses can launch crypto-focused investment funds in Hong Kong, further blurring the line.
Binance in China?
The complicated relationship between China and crypto is a tough one to follow. However, presently it seems as though whilst they may present a publicly hawkish stance against cryptocurrencies, crypto is very much alive in China, and the continued operations of Binance in the nation is an important, albeit confusing, piece of the puzzle.
As we recently reported, data showed that users had transacted $90 billion worth of crypto in China within a single month, which makes China one of Binance’s biggest markets. According to Binance employees, the exchange also collaborates with Chinese law enforcement.
Despite a diminished market following the 2021 ‘ban’, it can be argued that cryptocurrencies and crypto-related activities are alive and well in China. Furthermore, the implication is that major crypto exchanges are seemingly able to continue operations, suggesting that the Chinese government is unable to outright ban crypto, or may not want to.
Eddie is a gaming and crypto writer at CCN. Covering the often weird and wonderful world of Web3 with an adoring, but skeptical eye.
Prior to CCN, Eddie has spent the past seven years working his way through the crypto, finance, and technology industry. He began with PR and journalism with Bitcoin PR Buzz and BitcoinNews.com, eventually working his way to become a copywriter with a dozen firms, including the likes of Polkadot before returning to journalism in 2023.
Having studied Radio production and journalism at University in the UK, Eddie spent a few years making podcasts and presenting on a local London radio station as he built up his writing chops.
A lifelong skateboarder, Eddie can often be found at the skatepark or touring the streets looking for something new to try. That, or kicking back playing JRPGs on his original PSP.
