The ongoing crackdown on alleged underground gangs in China who use cryptocurrency for illegal foreign exchange transactions highlights the failure of the country’s ban on crypto trading in 2021. According to Chengyi Ong, the head of policy for the Asia-Pacific region at Chainalysis Inc., the decentralized nature of cryptocurrency makes the ban ineffective.
Despite the ban, China remains a significant market for cryptocurrency, as evidenced by the recent raids on gangs and companies involved in illegal transactions. These busts, involving over $140 million (one billion yuan), suggest that the ban has not deterred the use of cryptocurrency in the country.
In addition to restricting the use of crypto, China has also cracked down on cryptocurrency mining, causing many miners to relocate to more favorable countries. As a result, China has lost its position as the world’s top Bitcoin miner. However, the attempts to block or limit cryptocurrency trading have not been as successful.
The Bloomberg report explains that the demand for crypto in China is driven by the desire for alternative investments and a way to bypass the country’s strict capital transfer rules. The decentralized nature of cryptocurrencies like bitcoin (BTC) also contributes to the sustained interest among Chinese residents.
Chengyi Ong, the APAC policy head at Chainalysis Inc., suggests that authorities are struggling to suppress crypto trading in China. Despite the ban, an estimated $86 billion has flowed into the country, albeit at lower volumes than before the ban. These volumes still exceed those of Taiwan and Hong Kong. Ong argues that bans are ineffective in eliminating cryptocurrency activity and instead create “informal grey markets” that are harder to monitor and regulate.
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