Since the ban on cryptocurrency in China, traders have looked for various ways to conduct their operations away from watching eyes of the authorities. According to reports, cryptocurrency trade in the country still continues despite the ban.
The Chinese government recently released a report that showed that the cryptocurrency activities have greatly decreased since authorities imposed the ban. In the report, authorities claim that cryptocurrency trade in China accounts for less than 1% of the global trading volume. This, however, does not seem to be the case. Traders have developed mechanisms that allow them to conduct their trading activities unnoticed by the authorities.
According to the South China Morning Post (SCMP) and other local reports, authorities have identifies 124 cryptocurrency exchanges that have been illegally proving digital currencies to people around the country. Reports showed that in order to continue with their operations, some exchanges in China had to change or modify their domain names. It is believed that by doing so, the exchanges were able to pass as service providers not dealing in cryptocurrency exchange.
In addition to making a few changes in the domain names, some of the exchange also changes their address and contact information. According to local news, these changes have made it difficult for the authorities to detect and close down the exchanges.
Others have resulted in moving their operation to locations outside of mainland China to make it hard for authorities to track their operations.
Apart from making use of illegal operating exchanges, traders are also using peer-to-peer trading to circumvent the ban. Chinese traders are now exchanging crypto between wallets directly without using a middle person like an exchange. These have proven to be an effective, method especially for people who do not have reliable under the table exchanges. These types of transactions are done by converting fiat currency to Tether and sending the Tether as payment in exchange for virtual currencies. Traders conduct all their operations through a Virtual Private Network (VPNs).
The government has been tightening up regulations to make sure all the illegal cryptocurrency actives in the country are brought to an end. In August, authorities closed a number of local illegal exchanges and 124 offshore cryptocurrency exchanges that were providing services to Chinese Investors. While commenting on the challenges that Chinese regulators are facing as they attempt to stop crypto trade Terence Tsang, the COO of TideBit stated that:
“The latest warning and potentially increased monitoring of foreign platforms are targeted at a batch of smaller exchanges that had claimed to be foreign entities but are in fact operating in China claiming they have outsourced their operations to a Chinese company. Those exchanges whose website landing pages are in Chinese have drawn particular scrutiny by regulators.”
It is not yet clear whether authorities will ban trading with foreign cryptocurrency exchanges. People in the cryptocurrency space hope the ban will soon be lifted and allow crypto trade in the country.