Despite Beijing’s firm stance against cryptocurrencies, a significant number of Chinese citizens continue to trade digital assets on Binance, FTX, OKX, and Huobi, according to a Bloomberg report. A portion of the country’s 1.4 billion population is choosing to invest in crypto as an alternative to traditional investments such as stocks and property. The reasons behind this persistence despite the ban are intriguing.
On one hand, the decentralized nature of cryptocurrencies and the ease of trading on global exchanges make it difficult for governments to eradicate them entirely. Crypto enthusiast Caroline Malcolm, Global Head of Public Policy at Chainalysis, commented that “essentially, bans don’t work.” Furthermore, Chinese investors seem to find ways around the prohibition, such as using VPNs to conceal their locations and bypassing know-your-customer (KYC) procedures using their Chinese identification.
On the other hand, there is evidence to suggest that the ban has had some impact, albeit limited. Chainalysis data shows that the average monthly value of crypto inflows to China has declined by roughly half in 2022 from a year earlier; however, the figure remains significant at $17 billion. Notably, no sanctions have been announced by the Chinese authorities on offshore exchanges signing up mainland users, indicating either ineffective or loosely enforced prohibition efforts.
It is also essential to consider the official stance of crypto platforms like Binance and Huobi. Binance app and website are blocked behind the Great Firewall since September 2021, and their spokesperson asserts that the company does not operate in mainland China. Similarly, Huobi claims it has fully withdrawn from the Chinese market and no longer allows Chinese users to sign up.
Regardless of the reasons, Chinese investors’ continued involvement in the crypto market reflects their resilience and determination to explore alternative investment opportunities, even in the face of governmental restrictions. This might raise concerns over the effectiveness of China’s crypto ban and underscore the need for a more comprehensive approach to regulating the emerging asset class.
Should the crypto sector ever become legalized in China, there’s a possibility that it would lead to a surge in demand for cryptocurrencies, as suggested by Chainalysis’ Malcolm. In such a scenario, it would be interesting to observe the interplay of new technologies, markets, and policies as they unfold in the world’s most populous nation, potentially shaping the future of finance and investment on a global scale.
Source: Cryptonews
