May 28, 2024
By Anjali Kochhar
Despite China’s ban on cryptocurrency trading in 2021, recent searches on underground gangs exploiting digital assets for illegal foreign exchange operations highlight the ineffectiveness of the restriction. Chengyi Ong, Chainalysis Inc.’s head of policy for the Asia-Pacific region, underlined that the prohibition is mostly ineffectual because crypto activity is decentralised and peer-to-peer.
Reports from Bloomberg indicate a series of raids in China aimed at cracking down on illegal crypto transactions, with some gangs allegedly moving over $140 million (one billion yuan). These incidents suggest that China remains a significant player in the crypto market, despite attempts to curb its use.
While China previously dominated the Bitcoin mining landscape, stringent regulatory measures have prompted miners to relocate to more favourable jurisdictions, leading to a decline in the country’s mining dominance. However, efforts to block or restrict crypto trading have faced challenges due to persistent demand among Chinese residents.
The Bloomberg report suggests that Chinese investors are drawn to cryptocurrencies as alternative investments and as a means to circumvent strict capital transfer regulations. Additionally, the decentralised nature of assets like Bitcoin sustains interest among Chinese residents, despite regulatory hurdles.
Chengyi Ong highlighted the struggle of authorities to fully extinguish crypto trading, noting that significant activity continues to flow through China. Chainalysis Inc. estimates that up to $86 billion has entered the country’s crypto market since the ban, surpassing levels in Taiwan and Hong Kong. Ong argues that bans create “informal grey markets,” making it harder to monitor and combat illicit activities.
The continuous difficulty for Chinese regulators is to strike a balance between controlling money flows and meeting citizens’ demand for cryptocurrency. The continuation of peer-to-peer transactions and underground activity highlights the limitations of governmental bans in the rapidly changing cryptocurrency world. As China navigates its position on digital assets, the efficiency of its regulatory measures will be assessed in a global context.
About the author
Anjali Kochhar covers cryptocurrency stories in India as well as globally. Having been in the field of media and journalism for over three years now, she has developed a sharp news sense and works hard to present information that goes beyond the obvious. She is an avid reader and loves writing on a wide range of subjects.
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