How is China’s Crypto Ban Affecting Traders and Miners

Peer-to-Peer Trading 

One of the most common methods for Chinese investors to circumvent the ban is through peer-to-peer (P2P) trading. In this approach, traders buy and sell cryptocurrencies directly with each other. They often use centralized exchanges like OKX and Binance, which offer P2P trading.  

Even though the Chinese government’s “Great Firewall” blocks access to these exchanges’ websites, many users bypass these restrictions by using virtual private networks (VPNs). This allows them to continue trading without attracting unwanted attention. 

The Role of VPNs 

VPNs have become an essential tool for Chinese crypto enthusiasts. These networks mask the user’s location, allowing them to access websites and apps that are otherwise blocked by China’s internet censorship.  

VPNs are not just used for crypto trading; they are also a common way for Chinese citizens to access global platforms like Google and YouTube. For many, using a VPN is second nature, and it plays a crucial role in their ability to participate in the global crypto market. 

Methods Used by Crypto Traders and Miners 

Decentralized Finance and Airdrop Farming 

Decentralized finance (DeFi) offers another avenue for Chinese traders. In DeFi, transactions are conducted on blockchain platforms without the need for a central authority. This makes it difficult for the Chinese government to regulate these activities. Some traders have even turned airdrop farming into a lucrative business.  

Airdrop farming involves participating in promotional campaigns by blockchain projects, which reward participants with free tokens. These tokens can then be traded or held as investments. 

The scale of airdrop farming in China has grown significantly. What started as a small-scale activity has become a quasi-industry. Traders use bots to automate transactions and hire students to help farm these airdrops.  

This allows them to maximize their earnings while avoiding detection. Although blockchain projects are aware of these tactics and implement measures to limit bot activity, traders continue to find ways to bypass these barriers. 

The Legal Gray Area 

Cryptocurrencies themselves are not entirely illegal in China. Holding and exchanging cryptocurrencies is permitted, but these transactions are not protected by law. This means that if a dispute arises, the parties involved have no legal recourse. Despite this lack of legal protection, many traders continue to engage in these activities, taking on the associated risks. 

The Chinese government’s central bank digital currency (CBDC), the digital yuan, further complicates the situation. The digital yuan is considered the only legal digital tender in China, making other cryptocurrencies, including Bitcoin, illegal for use as payment. The promotion of the digital yuan is a key part of China’s economic strategy, and it is unlikely that the government will reverse its stance on cryptocurrencies anytime soon. 

Mining in China 

China’s 2021 ban on Bitcoin mining was widely publicized, but it has not completely stopped mining activities in the country. The ban was not as strict as initially reported, as it mainly focused on preventing the establishment of new mining operations and reducing the overall electricity consumption associated with mining.  

Despite the ban, China still accounts for a significant portion of the global Bitcoin hashrate. Estimates suggest that around 20-25% of the global hashrate comes from China, indicating that mining is still prevalent. 

Risks for Traders and Businesses 

Operating a crypto business in China comes with significant risks. The government can issue shutdown notices at any time, forcing businesses to close without warning. Traders who engage in P2P transactions also face the risk of dealing with unknown parties.  

This can lead to involvement in illegal activities such as money laundering, even if unintentional. To mitigate these risks, many traders prefer to deal with people they know personally, although this limits their trading options. 

A Look at the Future 

The likelihood of China reversing its crypto ban appears low, especially with the continued promotion of the digital yuan. The central bank’s focus on the CBDC indicates that the government is committed to maintaining its current stance on cryptocurrencies.  

While rumors occasionally surface suggesting a potential shift in policy, the reality is that the Chinese government is more interested in promoting its digital currency than embracing decentralized cryptocurrencies. 

In conclusion, despite China’s strict regulations on cryptocurrency, traders and miners continue to find ways to participate in the market. They use P2P trading, VPNs, DeFi platforms, and airdrop farming to stay active, although these activities come with significant risks. The Chinese government’s focus on promoting the digital yuan suggests that the current bans on cryptocurrencies will remain in place for the foreseeable future.