The reality of virtual currency transactions that are widespread despite being banned in China = WSJ report

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A report by the Wall Street Journal (WSJ) has revealed that in China, where crypto asset (virtual currency) transactions are prohibited, people still conduct transactions on a daily basis.

From using VPNs to secretive meetings in cafes and laundromats, the success of investors skirting China’s ban on crypto trading shows how difficult it will be for regulators across the world to police the sector https://t.co/8RfYEj6nfr https://t .co/8RfYEj6nfr

— The Wall Street Journal (@WSJ) January 18, 2024

On the 18th, WSJ, citing people familiar with Chinese affairs, detailed the crypto trading methods used by traders. One way is to use a VPN (virtual private network) to access exchange accounts outside China that were opened before China imposed the ban. Some traders are said to be able to access it without using a VPN.

Exchanges such as Bybit, KuCoin, and Gate.io currently do not allow mainland Chinese users to open accounts, and some have moved to close accounts based in mainland China.

Meanwhile, Huobi has introduced a “digital citizenship” program offered by the Central American country of Dominica, allowing users to apply for a digital ID from the country when opening an account. By obtaining this digital ID, users in China are effectively granted access to Huobi’s platform.

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Additionally, social media platforms such as WeChat and Telegram have become important tools for traders. Within a dedicated group, buyers and sellers can communicate with each other without going through an exchange.

Face-to-face spot trading

Additionally, traditional face-to-face transactions appear to be popular. Traders meet in public places, such as cafes, restaurants, and laundromats, and exchange wallet addresses with business owners and other customers. Payment methods include direct exchange of virtual currency, cash, and bank transfer. The ways to find trading partners are through the exchange’s P2P service and word of mouth.

Regarding the convenience of virtual currency trading, Associate Professor Ben Charoenwong of the National University of Singapore points out the following.

Spot trading is particularly popular in inland China, such as Chengdu and Yunnan province. Officials said this is because these regions, far from the coast, are generally poorer and have laxer enforcement of cryptocurrencies as local governments are busy addressing other social issues.

connection:Unregulated crypto stores in Hong Kong become attractive option for Chinese investors – report

China’s presence

In the 2023 edition of the Global Cryptocurrency Adoption Index released by blockchain analysis company Chainalysis in September last year, China was ranked 11th as a country where people are adopting cryptocurrencies at the grassroots level. There is. According to the firm’s analysis, Chinese traders received approximately 12.75 trillion yen ($86 billion) in cash from crypto activity between July 2022 and June 2023.

According to a global cryptocurrency investment survey conducted by Chinese cryptocurrency exchange Bitget from May 2023 to August 2023, investments in Europe, China, Japan, South Korea, Turkey, and some English-speaking countries The country with the highest number was China. Among Chinese investors, 18% allocated between 7.4 million yen and 14.9 million yen, and 19% allocated more than 14.9 million yen to cryptocurrency investments.

Additionally, on Binance, the world’s largest exchange, approximately 13.35 trillion yen ($90 billion) was traded by Chinese traders in one month last year.

connection:India ranks first in “Country that uses virtual currency on a daily basis” in Chainalysis 23rd year ranking

Chinese government tightens crackdown

China banned virtual currency trading and mining in 2021. However, as mentioned above, in reality, it appears that many transactions are being carried out that circumvent regulations.

Regarding mining, it dropped to almost zero immediately after the ban was announced in May 2021, but as of January 2022, it has returned to second place after the United States and accounts for approximately 21% of the world’s hash rate. The data was presented by the Center for Alternative Finance at the University of Cambridge.

connection:China returns to second place in global Bitcoin mining share – University of Cambridge

In response to this situation, in October last year, the Governor of the People’s Bank of China, Pan Gongsheng, stated in a report on financial activities of the State Council that the goal was to “strictly control illegal financial activities,” and “to prevent speculative activities such as virtual currency transactions.” The government once again demonstrated its stance of thoroughly cracking down on the law.

connection:Governor of the People’s Bank of China “Thoroughly crack down on virtual currency transactions” mentioned in the National People’s Congress announcement

In addition, China’s State Administration of Foreign Exchange warned in December last year that “purchasing virtual currency and exchanging it for foreign fiat currency is illegal.”

Furthermore, at the end of the same month, the bureau and the Supreme People’s Procuratorate issued a joint statement regarding illegal foreign currency exchange practices. After showing examples of cases where the stablecoin USDT was used, the government said it would further strengthen supervision and inspection of foreign currency exchanges and strictly punish criminal acts, discouraging illegal use of virtual currencies.

connection:China strengthens crackdown on foreign currency exchanges such as virtual currency Tether (USDT)

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