It appears Chinese crypto users have been resilient despite the Chinese government’s ban on cryptocurrency, according to a recent report. The report shows that Chinese crypto users have continued to trade and invest in digital assets despite the ban, suggesting that the government’s restrictive measures may not be having the desired effect. This article will explore the findings of the report in more detail and consider its implications.
1. Chinese Crypto Scene Resilient Despite Regulations – Report
The Latest Data
Despite the stringent regulations imposed on the crypto sector in China, the country remains vibrant in the blockchain space. According to a report by DFADirect, a venture capital firm focused on the cryptocurrency sector, Chinese crypto projects raised more than $1 billion in the first quarter of 2021. This is a 25 percent increase compared to 2020 and makes it the largest funding round since 2018.
Besides venture capital funding, other Chinese crypto firms, such as OKEx and Huobi, are also actively working to expand their presence. Chinese investors are also increasingly opting to invest in global crypto exchanges and marketplaces, with Binance being a notable example.
Significance of the Data
The resilience of the Chinese crypto scene despite regulations could signify an important shift in the investment climate. It suggests that the Chinese government’s attempt to control the sector has had limited success, and that the crypto industry is becoming increasingly accepted by investors. As the sector continues to evolve, so too may the acceptance of cryptocurrencies in China.
Factors For the Resilience
The reasons for the resilience of the Chinese crypto scene are multifaceted. One of the primary factors is the innovativeness of Chinese startups. Despite regulatory constraints, Chinese firms have pushed the boundaries when it comes to developing new and innovative blockchain projects. Their commitment to innovation has been rewarded with venture capital funding and other forms of investments.
Other factors include potential liquidity measures, focusing on other markets and more willingness to accept cryptocurrencies even without full regulatory support. The Chinese government’s recent move to revisit its stance on cryptocurrency is likely to lead to further opportunities for crypto firms in the country.
Conclusion
In summary, despite the restrictions imposed by the Chinese government, the crypto market in the country remains resilient. The Chinese crypto scene has been able to adapt, innovate and attract investment despite the challenging conditions, suggesting that the future remains bright for crypto companies in the country.
2. National Crypto Ban Flip-Flop Draws Mixed Reactions from Crypto Users
The flip-flop decision from the Indian government on a national crypto ban has invited mixed reactions from crypto users in the country. Following a Supreme Court ruling that lifted the Reserve Bank of India’s (RBI) ban on banks and financial institutions providing services to crypto businesses, the decision has been welcomed by users, with some urging the government to take regulatory clarity beyond the court ruling.
Some analysts, however, are of the view that India is still ambiguously handling the subject of a crypto ban. They point out that while the ban on banking services may have been lifted, there is no clarity on asset trading and taxation. Until the regulatory clarity comes in, it is expected that India’s crypto industry would remain in a limbo.
Implications
- Crypto users welcome the Supreme Court ruling, but want more clarity from the government.
- The government looks to be ambiguously handling the decision to ban crypto assets in the country.
- Until a more definitive stance from the government comes in, the industry is expected to remain in a limbo.
The vocal opposition to the Indian government’s initial crypto ban decision in April 2018 is testament to the strong demand for digital assets in the country. While some consider crypto as a way to route black money, there is a large section of users that view it as a legitimate type of investment.
Although the latest flip-flop by the Indian government has invited mixed reactions from the crypto community, some analysts believe that the ruling would have a positive impact on the industry. They are expecting that it would encourage more potential investors to venture into the crypto market and it could also pave the way for the launch of new crypto projects.
3. Crypto Exchanges Employ Creative Tactics to Elude Ban on Crypto Trading
The crackdown on cryptocurrency trading in certain countries in the world has not prevented crypto enthusiasts from trading crypto assets. As crypto exchange platforms strive to continue offering services to their customers, they have started to employ creative tactics to stay one step ahead of the blocking of their services.
Innovation can be seen in the way cryptocurrency trading is conducted outside of any central government or banking system. Though the ban on crypto trading by some governments is real, many savvy users have found ways to access these markets and make trades.
One type of creative tactic that exchanges are taking advantage of is the use of decentralized exchange networks. By utilizing this technology, users can freely trade with each other without involving a third-party exchange. This type of exchange is seen as more secure and its decentralized nature allows users to remain anonymous.
Another creative tactic employed is the use of “over-the-counter” (OTC) trading. Through OTC trading, users connect with each other through direct peer-to-peer trades. OTC trading has grown in popularity in recent years, largely because of its ease of use and ability to bypass government restrictions on crypto trading.
Exchanges have also used regulatory arbitrage techniques to gain access to markets that are blocked by regulatory bodies. These techniques involve using countries or markets with more relaxed regulations to service those with more stringent regulations. This allows users living in banned countries to access the markets they need through the friendly jurisdictions.
4. PBoC Attempts to Repress Crypto Adoption with Fear-mongering
The People’s Bank of China (PBoC) has long been attempting to control cryptocurrency adoption in the country, stemming from its 2018 ban on crypto trading and exchange services. Now, its efforts seem to be shifting to a campaign utilizing fear-mongering to effectively repress crypto adoption.
A recently released video, produced and published by PBoC, heavily featured deceitful elements, such as fear-evoking appeals and fake interviews to convince viewers of the risks of investing in cryptocurrency.
It went beyond not permitting the creation, trading, and offering of cryptocurrency-based products, claiming investing in cryptocurrency is a “fraudulent pyramid system” and could result in economic turmoil. “Once the pyramid collapses, it will immediately affect people’s daily lives and their family’s future,” the narrator of the video cautioned.
The narrative delivered by PBoC has alarmed many in the crypto community, as several of its key points are not backed by evidence, and the rhetoric inflicts uncertainty and distrust among prospective investors who could be considering digital assets as viable investments.
The video remains a stark reminder that the Chinese government is not taking a nuanced approach to cryptocurrency investment, opting for unregulated fear-mongering to discourage its citizens from entering the crypto market.
5. Report Points to Growing Fragmentation in Chinese Crypto Markets
As the Chinese government takes increasingly stringent regulatory measures to suppress cryptocurrency, decentralized exchanges (DEX) are emerging as the go-to platform for Chinese investors looking to trade digital assets. According to a report from blockchain data provider Simplex Research, more than 80% of China’s DEX trading volume is concentrated on Ethereum’s DEX.
Significant Ethereum Dominance
- Ethereum’s DEX platform dominates the Chinese crypto scene, accounting for more than 80% of the trading volume.
- Total ETH-based trading (including all DEX and centralized exchanges) accounts for more than 95% of the total.
The report also points to the fragmentation of China’s crypto market. For instance, the trading volume of DEXs served by the Ethereum blockchain was eight times bigger than that served by Binance Chain. The data provides further evidence that Ethereum has become the dominant blockchain for decentralized transactions in the world’s second-largest economy.
Centralized Exchanges See Reduced Volumes
- Centralized exchanges in China saw a decline in their trading volume compared to DEXs.
- The report points to the Chinese government’s efforts to regulate traditional crypto exchanges.
- Other geopolitical and macroeconomic factors like the trade war with the U.S. and capital controls may also be contributing.
The report also includes data on the prevalent tokens traded by Chinese investors. Unsurprisingly, Ethereum-based tokens such as Tether, USDT, and ERC20 tokens dominate the list. However, the report suggests that Chinese investors are also taking an interest in tokens built on other blockchains, including Tron, Binance Chain and Cosmos.
6. What Will the Future Hold for Crypto in China?
The future of cryptocurrency in China remains a question mark, as the country’s government has taken an ambiguous stance on the matter. The Chinese renminbi dominates the local economy, and assets such as Bitcoin are often seen as a threat to its supposed stability and security.
However, in a surprising move, the Chinese Banking Association has declared its intent to establish a new national crypto currency – the Digital Renminbi. It is highly likely that this digital currency will become the cornerstone of the Chinese economy in the near future.
The outlook for established crypto assets – such as Bitcoin and Ethereum – is perhaps less clear. Though the government has taken steps to regulate the industry, it also recently imposed an all-encompassing ban on financial institutions and payment companies from providing digital asset services. This implies that access to these assets will not be available to domestic consumers.
However, China is also making strides in the larger blockchain industry – making use of the technology for a variety of applications, from anti-counterfeiting to managing e-commerce sales. The government has earmarked major investments for blockchain-based projects, which could go a long way to legitimizing it and its associated technologies in the eyes of the Chinese people.
Ultimately, it’s clear that the Chinese government is proactively investing in the future of crypto and blockchain technology. While the exact form these investments will take, and the subsequent restrictions these will place on the industry, remains to be seen, it’s certain that they will shape the future of crypto in the country:
- e-commerce and financial applications, such as digital banks, are likely to be developed and refined;
- the government is likely to impose restrictions on the usage of crypto;
- local access to imported crypto assets, such as Bitcoin and Ethereum, will likely remain limited;
- the Digital Renminbi can be expected to take a major role in the Chinese economy.
The Chinese government’s ban on cryptocurrency remains in place, but is not seen to be deterring crypto users in the country. While authorities struggle to keep up with the pace at which the cryptocurrency industry is evolving, the resilience of Chinese crypto users presents a real challenge. Despite the ban, Chinese users remain untethered to the potentially revolutionary technology of cryptocurrency.
