China’s underground crypto market thrives despite harsh trading ban: WSJ

Despite Beijing’s 2021 ban on crypto trading, a thriving underground market reportedly continues to operate in China. The Wall Street Journal (WSJ) reported that investors circumvent the country’s stringent regulations through informal networks through VPNs, social media, and physical trading.

China is one of the world’s most stringent regions for crypto trading. Authorities actively pursue those involved in the sector, resulting in detentions, fines, and imprisonment. However, according to the WSJ, this has not deterred some Chinese traders. Further, in an exclusive interview, Bitfarms’ Chief Mining Officer, Ben Gagnon, identified a silent return to crypto mining in the region through energy capture technology in residential housing.

The Journal cited Chainalysis data from an October report, showcasing that from July 2022 to June 2023, Chinese traders received a net of $86 billion from crypto transactions. Their trading volume on Binance reportedly reached approximately $90 billion monthly.

Some Chinese traders purportedly maintained access to accounts on foreign crypto exchanges established before the ban, using virtual private networks (VPNs) to mask their locations and allowing them to bypass geo-restrictions. Further, the Journal stated that traders in China also use social media platforms like WeChat and Telegram to engage in crypto trading, assumingly peer-to-peer. They find buyers and sellers through dedicated groups on these platforms, bypassing the need for traditional exchanges.

Physical trades are also reportedly common, particularly in inland cities like Chengdu and Yunnan. Here, enforcement is laxer, and the Journal reports that traders often meet in public spaces like cafes or laundromats to exchange crypto wallet addresses or conduct transactions through cash or bank transfers.

Despite being a former crypto trading and mining hub, China’s stance on crypto remains rigid. The country has advocated using blockchain for applications like digital identities, tracking livestock, and authenticating luxury products. However, unlike decentralized ledgers typical of web3, China insists on using private blockchains for the most part.

Despite bans, crypto trading persists in China, a testament to its decentralized and global nature and highlighting real-world examples of how hard it is for governments to control blockchain-based digital assets. Nonetheless, China continues to attempt to clamp down on crypto usage.