Unfazed by crypto ban, Chinese traders flourish through ingenious tactics. Discover their evasion methods.
Chinese cryptocurrency traders continue to thrive despite the government’s strict measures against mining and digital currency transactions. In 2020, China accounted for over 75% of the global Bitcoin mining hashrate, but that changed when the government cracked down on cryptocurrencies. However, recent developments suggest that regulations may be slightly relaxed as investors seek promising new assets.
Chinese Bitcoin traders remain a significant force in Bitcoin trading, and their participation in the latest cryptocurrency sell-off is driven by market price fluctuations rather than new constraints imposed by Chinese regulators. According to Chainalysis, the Chinese cryptocurrency market processed $86.4 billion in crypto transaction volume between July 2022 and June 2023. Large retail transactions, ranging from $10,000 to $1 million, accounted for 3.6% of the total, nearly double the global average.
Experts from Chainalysis believe that recent events in Hong Kong have fueled speculation that the Chinese government may be warming up to cryptocurrencies, and Hong Kong could become a testing ground for these efforts.
Despite the ban on cryptocurrency trading in China since 2021, traders have found ways to bypass restrictions. Reuters reports that losses in the Chinese stock market over the last three years have driven investors back to cryptocurrencies. Dylan Run, a financial executive in Shanghai, refers to Bitcoin as “a safe haven, like gold.” In early 2023, he started shifting some of his funds into cryptocurrencies.
Although officially banned, cryptocurrency trading remains accessible in China. Citizens continue to trade digital tokens like Bitcoin on platforms such as OKX and Binance or through over-the-counter methods. Another option is using foreign bank accounts to buy cryptocurrencies.
Chinese investors have become more creative in managing their funds due to the cryptocurrency ban. Dylan Run, for example, used bank cards from small rural banks to purchase cryptocurrencies through unofficial dealers. Traders have also found various ways to transfer cryptocurrencies, including cash or bank transfers. Cities like Chengdu and Yunnan have become hubs for these traders, offering a respite from the central government’s scrutiny.
Chinese investors also turn to social networks like WeChat and Telegram for cryptocurrency trading, bypassing the need for centralized exchanges. In rural areas, where enforcement is less strict, the physical trading of digital assets is prevalent. Traders often meet in public places such as cafes or laundromats to exchange wallet addresses or conduct transactions in cash or through banks.
Hong Kong also offers savings opportunities for Chinese citizens, as they are given an annual foreign currency purchase of $50,000, which some use to buy cryptocurrencies in the Hong Kong market. As China’s real estate market continues to struggle, more citizens may turn to cryptocurrencies. The country’s property market ended 2023 with the steepest fall in new home prices in nearly nine years.
Chinese brokers and other financial institutions have also entered the cryptocurrency market. Fintech platforms like Ant Group’s Alipay and Tencent’s WeChat Pay have made it easier for citizens to invest in cryptocurrencies. They allow users to convert yuan into stable digital coins at dealers, which can then be used to trade cryptocurrencies on various exchanges.
Some users have bypassed geo-restrictions using a VPN and continued to use trading platforms after the ban. In May 2023 alone, the turnover of Chinese traders on Binance reached $90 billion, approximately 20% of the total. Some traders opened crypto accounts with fake documents, including citizenship, to circumvent Know Your Customer (KYC) protocols and register accounts violating regulatory measures.
The surge in Bitcoin and other cryptocurrencies in China comes from underperforming traditional Chinese investments. The crackdown on the real estate sector and the ongoing economic transition have made conventional investment avenues less attractive. Cryptocurrencies are emerging as a viable alternative, offering stability and growth potential amid the turbulence of the Chinese economy. Chinese traders’ rise in cryptocurrency investment reflects a strategic shift in response to a changing economic and regulatory environment.
