No Full Ban to Crypto in China: $90 Billion Trade on Binance Tells a New Tale

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Recent reports have shaken the widely accepted belief that China has implemented a complete ban on cryptocurrencies. Contrary to what many people think, there seems to be a lively cryptocurrency trade happening within China. 

Binance, the world’s top crypto exchange, is said to have facilitated an incredible $90 billion in Chinese crypto trade within the span of just one month.

China’s Cryptocurrency Policies

Exploring China’s stance on cryptocurrency reveals a regulatory landscape that’s much more complex than the common belief of a total ban. People in the know argue against the idea of a complete ban, saying individuals aren’t legally stopped from holding or trading crypto, but their actions might not have legal protection.

While there have been clear crackdowns, like in 2013 when financial institutions couldn’t be part of Bitcoin and in 2017 when initial coin offerings (ICOs) were banned, it was also made clear that virtual currency exchanges couldn’t openly operate in China.

A more significant crackdown happened in 2021 when Bitcoin was completely stopped in China, saying it’s not considered real money. The rules stated that activities related to virtual currency were seen as illegal financial activities.

Loophole In Crypto Ban

Despite a crackdown on domestic crypto mining in 2021, China’s restrictions left noticeable gaps. The rules from 2021 don’t seem to stop people from holding cryptocurrency, and they also don’t seem to block peer-to-peer trading between individuals.

Interestingly, some people found ways around the restrictions. They continued using accounts they had opened on overseas exchanges, sometimes using a VPN and sometimes without it. 

They also kept trading directly using social apps like WeChat or Telegram. Some even went a step further by making companies outside China through others and then using those companies to complete the institutional know-your-customer (KYC) identification on crypto exchanges.

Seeing that a lot of crypto trading survived the “ban,” it looks like China maybe didn’t really want to get rid of crypto completely.

China’s Dual Dance

China’s cautious crypto approach stems from concerns about potential misuse for evading capital controls. However, the country has demonstrated a consistent interest in blockchain technology, issuing a Web3 white paper and exploring a central bank digital currency. 

This dual approach hints at China leaving the door slightly ajar for crypto, while effectively managing associated risks.

Hong Kong’s Role

Hong Kong, operating under the “one country, two systems” model, has positioned itself as a digital asset hub in Asia. Its relatively favorable stance toward crypto, coupled with the approval from Beijing, allows China to maintain a foothold in the crypto sphere while managing risks effectively.

Characterizing China’s crypto policy as an outright ban oversimplifies a nuanced reality. Instead, it suggests that China aims to control and regulate crypto activities rather than eliminate them entirely.