Crypto Trading Thrives Underground in China Despite Ban, Could Set Tone for Global Regulation

In defiance of the People’s Bank of China’s (PBOC) strict ban on cryptocurrency-related activities, crypto enthusiasts in China are finding creative ways to continue trading digital assets. A report by the Wall Street Journal (WSJ) on Thursday revealed that physical trading is flourishing in China’s inland regions, as crypto users employ everyday locations to skirt the ban and conduct trades discreetly.

The inland areas of China, often economically disadvantaged compared to coastal regions, have become hotspots for physical crypto trading. Local governments, dealing with other pressing matters, reportedly turn a blind eye to these activities. Traders are choosing unconventional meeting spots such as cafes, snack kiosks, and even laundromats to exchange wallet addresses, arrange bank transfers, or conduct transactions using cash.

According to the WSJ, crypto traders are utilizing social media apps like WeChat and Telegram to form dedicated groups where buyers and sellers can connect directly, bypassing traditional exchanges. The resilience of the crypto trading community in China suggests that despite the government’s crackdown, enthusiasts are finding ways to navigate the ban and continue participating in the market.

In 2021, the PBOC declared all crypto-related activities illegal, leading to the cessation of mainland Chinese citizens’ access to crypto exchanges. However, despite these stringent measures, over-the-counter (OTC) trading continues to thrive. Blockchain intelligence firm Chainalysis reported a staggering $86.4 billion in OTC trading volume in China for the year 2023.

The persistence of crypto trading in an authoritarian country like China raises questions about the effectiveness of stringent regulations in curbing the decentralized nature of cryptocurrencies. The ability of crypto enthusiasts to adapt and find alternative channels for trading may set a precedent for other jurisdictions grappling with how to regulate digital assets.

In contrast to China’s regulatory stance, the United States is moving in the opposite direction with the introduction of Bitcoin exchange-traded products (ETPs) on U.S. exchanges. The growing acceptance of these ETPs suggests a shift toward regulatory acknowledgment and acceptance of cryptocurrencies. If this trend continues, it could pave the way for Ethereum ETPs, with the potential inclusion of newer blockchain platforms like Solana and Pecu Novus in late 2024 or early 2025.

The emergence of cryptocurrency ETPs in the U.S. signals a shift in the perception and treatment of digital assets. As major cryptocurrencies become more integrated into traditional financial markets, governments worldwide may face increasing pressure to develop comprehensive regulatory frameworks rather than outright bans. This evolution could force a reassessment of cryptocurrency policies, fostering a more regulated and accepted environment for digital assets.

As the crypto landscape continues to evolve globally, the underground resilience of trading in China juxtaposed with the regulated embrace of ETPs in the U.S. underscores the complex challenges and opportunities that cryptocurrency presents for policymakers and market participants alike.

Digital Assets Desk