Despite China’s strict ban on cryptocurrency transactions, its citizens continue to find innovative ways to engage with digital assets. As the world’s most populous country, China’s unwavering interest in cryptocurrency raises questions about the ban’s effectiveness and possible changes in government policy.
Cryptocurrency Demand Remains Strong in China
Even though the Chinese government banned cryptocurrency operations, the demand for digital assets in the region appears unshaken, as noted by Bloomberg. While the average monthly inflow of cryptocurrency into China decreased by 50% within a year of the ban, data from Chainalysis, a crypto intelligence firm, reveals that it still amounts to a staggering $17 billion.
Various sources, such as FTX’s creditor profile and personal accounts from Chinese citizens trading on crypto platforms, provide evidence of China’s persistent demand for digital tokens.
Bypassing the Ban: Strategies Employed by Industry Players
The collapse of the FTX exchange serves as a prime example of the impact of China’s crypto ban on the market, as it led to a total loss of $200 billion in value. However, industry players have devised methods to circumvent the ban.
Bloomberg’s report on FTX’s bankruptcy proceedings indicates that 8% of the defunct exchange’s customer base consisted of Chinese citizens. Jack Ding, a lawyer representing six Chinese creditors with a combined claim of $10 million, explained that enforcing the crypto ban on Chinese individuals domestically and abroad is challenging.
The level of compliance of these exchanges is debatable. Interviews with Chinese investors reveal their ability to trade on platforms like Binance and OKX following the imposition of the crypto ban. While they may have used virtual private networks (VPNs) to execute transactions, these investors claimed to have registered on the exchanges using Chinese identification.
Loopholes and Speculations: The Future of China’s Crypto Ban
Additional evidence of China’s crypto ban’s shortcomings includes reports that major crypto exchange Huobi once allowed Chinese citizens to access its platform using Dominican digital identities.
The People’s Bank of China has not commented on the evidence of Chinese citizens’ ongoing cryptocurrency trading. However, there is widespread speculation that Beijing may reconsider the ban.
These discussions are fueled by the crypto-friendly policies of China’s particular administrative region, Hong Kong, which many believe to be discreetly supported by mainland China. Furthermore, the emergence of Chinese-regulatory-compliant tokens, such as Conflux (CFX), could encourage dialogue and prompt the government to relax its restrictions.
The persistence of cryptocurrency demand in China, despite the imposed ban, highlights the need for the government to reevaluate its stance on digital assets.
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