Those following cryptocurrency space are aware that financial institutions and banks in China are prohibited from dealing in digital currency. However, digital currencies are not out-and-out illegal in the country. Let alone the crypto space; even the traditional fiat transfers are not free of governmental restrictions. Then there are global trade wars along with stringent banking regulations that add to money transfer woes of the Chinese nationals. In these circumstances, cryptocurrency somewhat serves as a breeze.
Though Bitcoin has what we can call an uncertain legal position in China, the nationals are discovering newer ways to utilize cryptocurrency channels to make things a bit easier.
The crypto situation in China
When it comes to legal stature of cryptocurrency in China, there are plenty of misconceptions initiating series of debates. All of it aggravated even more post the numerous government bans that took place in the year 2017. Not only people were barred from buying, selling, or trading virtual currencies, but bitcoin exchanges were also made to shut down back then. The authorities also banned online access to foreign exchanges like Coinbase through the nation’s Great Firewall.
The current scenario, however, doesn’t consider crypto as illegal. Instead, it is observed as a property under the nation’s law although there are certain things and crypto-related activities that fall under the illegal zone in China, they are:
- Crypto’s non-OTC exchange
- Brokerage services of crypto
- Dealing in Bitcoin by banks
- Exchanges allowing purchase & sales of crypto
In simpler words, any transaction which connects government’s fiat, such as yuan, with crypto directly is forbidden. April 2019 also saw a proposal asking ban on mining activity, the action for which is not taken.
The gray area
In the middle of such limitations, there is a presence of a legal gray zone of OTC trading. It is largely facilitated by VPNs, offshore exchanges, as well as stablecoins such as Tether’s USDT. Moreover, crypto exchanges such as Huobi makes it possible for people to continue trading by operating as the OTC front. Once traders connect through Huobi’s platform, the settlement is done via popular payments and messaging applications like Wechat.
While the authorities are continuing the crypto crackdown, China is also reportedly planning to come out with its very own centralized asset soon. It is said to be pretty similar to a digital yuan.
Fiat restrictions & their evasion with crypto
It is not just crypto that is regulated heavily in China; there are stringent regulations over conventional fiat transactions too. The people in China are not allowed to perform international transfers exceeding 50K dollars per day. On the other hand, expats technically don’t have such limitations on money transfers, but they need to prove the legality of their income to do so. That in itself is an extremely tough task.
Despite heavy restrictions and their strong consequences, people are still advocating for economic freedom and resorting to crypto usage. After all, amidst the tight financial regulations, Bitcoin seems too convenient to not use. The fact that offshore exchanges can be accessed through VPNs also makes it all the more of a good option.
Furthermore, VPNs can also be used by the resident Chinese population for accessing p2p OTC trading websites such as Local.Bitcoin.com. It allows them to purchase and sell BCH, as well as fiat money, through varied payment channels. The trading volume on such sites also remains steady, indicating that crypto is capable of finding its way regardless of restrictions.
As per reports, many traders in China are dominantly using Tether’s stablecoin USDT nowadays. If that was not all, Tether Holdings has unveiled CNHT, a Chinese yuan stablecoin, to cash in on the increasing interest.
Technology making a difference
The innovation in the technological front has somewhat made the outdated legacy finance practices obsolete. Thanks to the emerging techniques and tools like VPNs, chat applications, and protocols for cryptocurrency transfers, crypto is undergoing expansion regardless of barriers. It is providing users with an affordable and feasible financial solution, not just in China but across the globe.