Crackdown on cryptocurrencies intensifies in China yet again
In the heart of Asia, Beijing continues its crackdown on commercial cryptocurrency activities, including trading and mining bitcoin. However, the digital currency demonstrates its status as a true global currency, persisting even in the face of authoritarian governments' disapproval.
Chinese citizens have found a loophole in this regulatory maze, utilizing P2P platforms to trade cryptocurrencies on foreign exchanges or DeFi platforms. OKX and Binance, among other platforms, have become popular choices for Chinese citizens looking to buy cryptocurrencies. Accessing these platforms often requires the use of VPNs, allowing them to bypass geographical restrictions.
The Chinese government's focus is on ensuring strict supervision and reporting of illicit transactions through financial institutions amid the broader crackdown on crypto and illicit financial flows in china. Chinese banks have been instructed to closely monitor and report risky transactions, including those involving cryptocurrencies, underground banking, or gambling activities.
Despite these measures, Chinese citizens are reported to have smuggled out more than $250 billion illegally in 2024, with cryptocurrencies being a crucial instrument in this process.
The government views digital assets as a threat to financial stability, primarily meaning capital flight. In response, new regulations have been introduced to make it harder to circumvent the country's currency controls using cryptocurrencies. Bitcoin, along with other cryptocurrencies, has been banned as a payment method, the sale of tokens via ICO, the operation of exchanges, mining, and any other business related to crypto.
However, the resilience of bitcoin in china is evident. Chinese citizens continue to hold, buy, and trade bitcoin, using stablecoins and DeFi platforms for cross-border business or moving money abroad. Mining in china has not been eliminated as much as thought in 2021, partly due to loopholes in the legal system and illegal mining tolerated by corrupt authorities. Depending on calculations, china accounts for a significant portion of the global hashrate in mining.
Contrasting the strict regulations in china, the European Union (EU) has been tightening crypto regulation for years, but unlike china, it does not require banks to monitor and report transactions with crypto service providers or ban the operation of crypto exchanges and bitcoin mining. The EU's MiCA imposes observation and reporting obligations on service providers that go far beyond what is required for cash and bank transfers.
Despite the bans and tight regulations, bitcoin cannot be banned, even by china. The digital currency continues to thrive, proving its status as a global currency that persists despite the disapproval of certain governments.
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