Ban Invalid! China's Underground Cryptocurrency Market Continues to Thrive

According to a report from the Wall Street Journal, despite the Chinese government's strict stance on cryptocurrency trading, investors have been able to circumvent regulations through the use of VPNs, social media, and physical transactions conducted on informal networks. The mining industry has also quietly returned to China through the use of energy recovery methods. In a joint effort, China's Supreme People's Procuratorate and the State Administration of Foreign Exchange are cracking down on illegal cross-border financial activities, with a focus on money laundering involving USDT.

Mining Industry Quietly Returning to China

China is one of the most strictly regulated regions for cryptocurrency trading. However, according to a report by CryptoSlate, the mining industry is slowly making a comeback in China. Ben Gagnon, the Mining Director of Bitfarms, pointed out in an interview that the mining industry is quietly returning to China, especially through residential and office projects that utilize waste recycling, particularly in the form of heat energy.

According to a report by blockchain research firm Chainalysis in October last year, from July 2022 to June 2023, the value of cryptocurrencies received by Chinese traders reached as high as $86.4 billion. The report also noted that although Hong Kong's population is only 1/200th of China's, the value of cryptocurrencies received by Hong Kong is also not far behind, reaching $64 billion.

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Bypassing Surveillance with VPN, P2P, and Physical Trading

According to The Wall Street Journal, some Chinese traders still have access to foreign cryptocurrency exchange accounts established before the ban was implemented. They use virtual private networks (VPN) to mask their location and bypass geographical restrictions. They also utilize social media platforms such as WeChat and Telegram for cryptocurrency trading, finding buyers and sellers through dedicated groups on these platforms, thus circumventing the need for traditional exchanges.

In addition, physical trading is also common, especially in inland cities with more relaxed regulations such as Chengdu and Yunnan. Traders often meet in public places like coffee shops or self-service laundromats to exchange cryptocurrency wallet addresses or conduct transactions through cash or bank transfers.

China's Centralized Use of Blockchain Technology

China was once a hub for cryptocurrency trading and mining, but its stance on cryptocurrencies remains strict and is conducted in a centralized and government-led manner. The country promotes the use of blockchain in applications such as digital identity, livestock tracking, and luxury goods verification. However, unlike the typical decentralized ledger of web3, China largely insists on using private blockchains.

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