About two years ago, the Chinese government banned cryptocurrency, forbidding its citizens from its use. However, it seems the ban is not enough to deter people in the country from investing in digital assets.
China, the most populous nation in the world, has reportedly failed in its attempt to prevent the use of crypto in its territory. This is evident as its citizens continue participating in various crypto transactions despite the embargo.
According to the report, the average amount of crypto circulating in China before the ban remains the same after the a year ban. The value remains about $17 billion, according to stats from Chainalysis, a crypto analytic firm.
In addition, the demand for crypto and related services in China continues to increase. The massive demand for digital tokens is established via different sources ranging from statements from Chinese investors who trade on crypto exchanges and FTX’s creditor portfolio.
Furthermore, industry players have also been practicing various ways to elude the crypto ban, participating in numerous transactions, according to the report.
Poor Exchanges’ Compliance Renders Crypto Ban Ineffective
Last year, the fall of the FTX exchange was arguably one of the most significant events in the crypto space. It had a massive impact on the market as many businesses and investors incurred losses.
A total of $200 billion was reportedly lost due to the event. Additionally, reports showed that about 8% of the victims of the FTX collapse were Chinese investors.
Furthermore, 6 Chinese creditors who accounted for about $10 million of the FTX loss reportedly charged the troubled firm to court. Their attorney, Jack Ding, commented on the state of cryptocurrency in China.
According to Ding, Chinese Crypto traders are outlaws both in China and in the diaspora, theoretically speaking. However, he blamed the difficulty of enforcing the ban on crypto for Chinese citizens on the efficient compliance policies employed by exchanges.
Attorney Ding stated that interviews with some Chinese crypto investors revealed that some exchanges permissively allowed their transactions despite their active bans. For instance, four of the Chinese investors transacted on the Binance exchange, while an individual used the OKX exchange.
Even though they could have used a virtual private network (VPN) to hide their identity, they did not. They all claimed to have used their Chinese identity to register on the crypto exchanges they used without any restriction. This incident shows a glaring hole in the enforcement of the ban.
Another similar case comes from a report that said the Huobi exchange planned to allow Asian investors to trade crypto by registering them as Dominican citizens. Consequently enabling them to bypass China’s ban on digital assets.
A Possible Ban Lift In China
The People’s Bank of China still maintains its stance, prohibiting crypto transactions among its citizens. Despite the rumors of many bypassing the rule, the authority has yet to comment.
However, many crypto speculators hinted that the Chinese government might contemplate lifting the ban. Their beliefs were backed by the apparent crypto-friendly stance made by Hong Kong recently. They also believed that China’s mainland fueled the positive movement.
In addition, the creation of crypto tokens like Conflux (CFX), which has a high compliance rate with Chinese crypto laws, might have endeared the government to loosen its tight grip on crypto. If China’s crypto ban is lifted, there will be a massive and rapid adoption of cryptocurrency worldwide.