In defiance of China’s crypto ban, traders in the country have ingeniously devised alternative methods for engaging in the cryptocurrency market.
Crypto trading has persisted in an authoritarian environment like China, signaling potential challenges for other jurisdictions aspiring to adopt a more prohibitive regulatory stance.
How Traders Circumvent China’s Crypto Ban
Chinese traders utilize social media platforms like WeChat and Telegram to connect with potential trading partners. This enables peer-to-peer transactions without relying on traditional crypto exchanges. Meetings often occur in public venues like cafes or laundromats, where traders exchange wallet addresses and drives containing cryptocurrencies.
Beyond the direct transfer of cryptocurrencies, traders have diversified payment methods, including cash or bank transfers for cryptocurrencies. Specific cities like Chengdu and Yunnan have become popular among these traders, as operating in these locations helps evade monitoring and enforcement by the central government, which is preoccupied with other priorities.
“China seems to have been unsuccessful in its efforts to ban crypto trading, possibly putting their strict capital controls at risk,” Coin Center’s Neeraj Agrawal said.
In addition, some traders have also resorted to using VPNs to access foreign crypto exchanges. Although several exchanges claim to have closed accounts belonging to Chinese residents, traders have persistently found innovative ways to gain access.
A report last year highlighted that some traders were opening crypto accounts with forged documents, including fake nationalities. By providing false residence and bank details, these traders aim to circumvent Know Your Customer (KYC) protocols and register accounts in defiance of regulatory measures.
This unconventional approach to cryptocurrency trading stands in stark contrast to the stringent regulatory environment in the nation. China first banned crypto in 2013 and extended the prohibition to cryptocurrency mining in 2021.
Despite these measures, cryptocurrency activities in China continue to flourish. A Chainalysis report ranked China as the third Asian country with the highest crypto activities.
The report further indicates that China received a substantial $86.4 billion in crypto transactions between 2022 and 2023. Therefore, underscoring the challenges of effectively policing the sector in the face of determined traders.