The Chinese government and its central bank, the People’s Bank of China (PBoC), enforced a strict crypto trading ban in September 2017. However, the country’s local cryptocurrency market remains active, with hotels, exchanges, and over-the-counter (OTC) trading platforms in support of digital assets.
Local authorities have banned commercial banks from dealing with overseas crypto exchanges and OTC trading platforms, and urged financial institutions to censor transactions suspected of being associated with crypto companies.
However, with VPN, stablecoins, Hong Kong crypto exchanges, OTC platforms and overseas savings accounts, it has become increasingly difficult for the Chinese government to restrict crypto.
Some new photos of the “ETH Hotel”, China’s first hotel to accept payments from ETH. Bitcoin is also in there!
Shared by TooYoungTooSimple on Wechathttps: //t.co/bBnYRhkOoP pic.twitter.com/gG1dt7o7FI
– cnLedger (@cnLedger) September 28, 2018
The Chinese crypto market is still very active
On September 25, the Ethereum Hotel, China’s first hotel to accept Ethereum (ETH) as a payment method, reportedly opened its store in the National Scenic Area of Four Girls Mountain, Sichuan Province.
Related: China’s largest payment app AliPay bans accounts trading Bitcoin in OTC
The institution’s launch came after the government’s decision to ban all activities related to the cryptocurrency market, including events. Previously, as CryptoSlate reported in August, the local financial regulators in China had asked Alipay, the $ 60 billion fintech payment app, to block all transactions sent to OTC crypto platforms.
At the time, Financial News, a People’s Bank of China (PBOC) publication, announced that ICO and crypto trading activities in China had not been fully dematerialized following the official ban in September 2017.
“ICOs and virtual currency trading have not fully withdrawn from China following the official ban. After the closure of the domestic virtual currency exchanges, many people turned to overseas platforms to continue engaging in virtual currency transactions,” it said in the report.
In fact, many sources and companies, including Terence Tsang, a Hong Kong and Taiwan-based digital asset exchange manager, said that crypto trading had become increasingly popular in China after the ban.
According to Tsang, the government’s ban on crypto trading only targeted exchanges within mainland China that posed as foreign companies but operated within the country. He stressed that the Chinese government has not effectively enforced strict anti-trading policies for OTC platforms and exchanges in overseas markets such as Hong Kong.
Speaking to SCMP, a mainstream media company in Hong Kong, Tsang said:
“The recent warning and potentially increased surveillance of overseas platforms is targeting a number of smaller exchanges that were supposedly foreign companies but actually operate in China and claim to have outsourced their operations to a Chinese company.”
It is extremely difficult for the Chinese government to completely ban all crypto trading activities in China as most traders purchase stable coins such as Tether, Gemini Dollar and PAX and then invest in the crypto market via pure cryptocurrency exchanges.
To completely ban crypto trading, local financial regulators will have to censor money transfers from China to Hong Kong and other overseas markets, which is incredibly inconvenient as investors can simply create savings accounts for shell companies to receive money.
A source close to a major exchange in Asia said the only way the Chinese government can stop crypto trading is to turn off VPNs.
The source said:
“Chinese regulators definitely have the technical ability to shut down VPNs. Traditionally, however, it takes numerous conversations with various stakeholders to reach consensus on how to configure a firewall, which lengthens the process. “
What is happening to China?
Cryptocurrency trading activity in China has grown so rapidly in the past nine months that companies have begun raising millions of dollars in seed capital to provide insurance and security services to OTC digital asset trading platforms in the country.
The growth of the local market is expected to continue despite the existing ban even if the government restricts trade.
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