No Total Crypto Ban in China: Binance’s $90 Billion Transactions Tell a New Story
A recent report has shaken the widely held belief that China has implemented a complete ban on cryptocurrencies. Contrary to what many people think, cryptocurrency trading appears to be active in China.
Binance, the world’s leading cryptocurrency exchange, is said to have facilitated a whopping $90 billion in Chinese cryptocurrency trading in just one month.
China’s cryptocurrency policy
A look at China’s stance on cryptocurrencies reveals a regulatory environment that is far more complex than the common belief in an outright ban. Those in the know argue against an outright ban, saying that while individuals will not be legally prevented from holding or trading cryptocurrencies, their actions may lack legal protection.
While there have been clear crackdowns, such as financial institutions not being able to participate in Bitcoin in 2013 and ICOs being banned in 2017, it has also become clear that cryptocurrency exchanges cannot operate openly in China.
A more significant crackdown came in 2021 when Bitcoin was completely suspended in China, saying it was not considered real money. The rules state that activities involving virtual currencies are considered illegal financial activities.
Loopholes in Cryptocurrency Ban
Despite a crackdown on domestic cryptocurrency mining in 2021, China’s regulations leave notable gaps. The 2021 rules don’t seem to stop people from holding cryptocurrencies, nor do they seem to prevent peer-to-peer transactions between individuals.
Interestingly, some people have found ways to circumvent the restrictions. They continued to use accounts they had opened on foreign exchanges, sometimes using a VPN and sometimes without a VPN.
They also continued to transact directly using social apps such as WeChat and Telegram. Some have gone one step further, creating a company outside of China through another company and then using that company to complete know-your-customer (KYC) identification for the institution on cryptocurrency exchanges.
It appears that China does not want to completely eliminate cryptocurrencies, as many cryptocurrency transactions survived the “ban.”
Chinese double dance
China’s cautious approach to cryptocurrencies stems from concerns about their potential misuse to evade capital controls. However, the country has shown continued interest in blockchain technology, including issuing the Web3 white paper and exploring central bank digital currencies.
This dual approach suggests that China is leaving the door slightly open to cryptocurrencies while effectively managing the associated risks.
Hong Kong’s role
Operating under the ‘one country, two systems’ model, Hong Kong has established itself as a digital asset hub in Asia. Beijing’s relatively friendly stance on cryptocurrencies and its approval have allowed China to maintain a foothold in the cryptocurrency space while effectively managing risks.
Characterizing China’s cryptocurrency policy as an outright ban oversimplifies a nuanced reality. Instead, it suggests that China aims to control and regulate cryptocurrency activity rather than eliminate it entirely.