Underground Crypto Market Flourishes in China Despite Ban, Reports WSJ

January 23, 2024

By Sharan Kaur Phillora

Despite Beijing’s stringent ban on crypto trading in 2021, an underground crypto market is reportedly thriving in China, according to The Wall Street Journal (WSJ). Investors are finding ways to circumvent the nation’s strict regulations through various means, including VPNs, social media platforms, and physical trading methods.

Here’s what we know:

Data from Chainalysis from July 2022 to June 2023 indicated that Chinese traders netted $86 billion from crypto transactions, with their trading volume on Binance reaching nearly $90 billion monthly. This substantial activity suggests that despite official restrictions, a significant amount of crypto trading still occurs within the country.

Some Chinese traders have reportedly continued using accounts on foreign crypto exchanges established before the ban was implemented to circumvent the ban. They utilize virtual private networks (VPNs) to hide their geographical locations, thus bypassing geo-restrictions. Social media platforms like WeChat and Telegram have also become hubs for peer-to-peer crypto trading, where traders find buyers and sellers in dedicated groups, eliminating the need for conventional exchanges.

Physical trades are also common, especially in inland cities like Chengdu and Yunnan, where enforcement is reportedly less stringent. Traders often meet in public places to exchange crypto wallet addresses or complete transactions through cash or bank transfers.

While China was once a major crypto trading and mining hub, its current stance on cryptocurrencies remains firm. The government advocates blockchain use for specific applications but insists on private blockchains, differing from the decentralized ledgers typical of web3.

As reported by the WSJ, the persistence of crypto trading in China underscores the decentralized and global nature of cryptocurrencies. It also highlights the challenges governments face in controlling blockchain-based digital assets. Despite its efforts, China continues to witness crypto usage, albeit in a more covert and decentralized manner.

About the author

Sharan Kaur Phillora’s thirst for knowledge has led her to study many different subjects, including NFTs and Blockchain technology – two emerging technologies that will change how we interact with each other in the future. When she isn’t exploring a new idea or concept, she enjoys reading literary masterpieces.

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