Chinese traders have found ways to invest in bitcoin despite ban
The offshore exchanges have managed to get around the government’s ban by frequently changing their domain names to avoid detection.
September 10, 2018 / 04:46 PM IST
LocalBitcoins | This peer-to-peer exchange allows people from different countries to exchange their local currencies to bitcoins. Users post advertisements on the exchange stating their exchange rate and preferred payment method for buying or selling bitcoins. By replying to these advertisements, a trade is opened and escrow protection is automatically activated. Escrow protects both buyer and seller, by keeping the bitcoins safe until the payment is done and the seller releases bitcoins to the buyer. Bitcoins are placed in LocalBitcoins web wallet from where one can pay for their bitcoin purchases directly. However, investors need to be aware of scams as they are dealing directly with other people unlike other stock-like exchanges or centralized bitcoin trading sites.
Traders have found multiple ways to bypass the cryptocurrency ban in China despite tightening scrutiny on crypto by state regulators and exchanges. These incidents are happening despite the Chinese government hailing the ban on cryptocurrencies as a success.
The offshore exchanges have managed to get around the government’s ban by frequently changing their domain names to avoid detection and also moved their servers to countries outside China, as per a report in News BTC.
Following a report that claimed regulators were stepping up their actions against illegally operating exchanging, Chinese trading volume dropped 33 percent, signalling that traders were likely moving their cryptos to cold storage wallets due to the risk involved with holding their digital currencies on an exchange.
Some Chinese companies, including WeChat, Tencent, and Ant Financial, have all taken actions to block cryptocurrency trading on their platforms.
Chinese state-run newspaper, the Shanghai Securities Times, had stated in late August that authorities were moving swiftly to block access to illegal exchanges and 124 offshore exchanges servicing Chinese citizens.
In July, the Central Bank of China had released a report claimed that the country’s cryptocurrency ban had been incredibly successful and had reduced Yuan trading activity to under 1 percent. Yuan once accounted for 90 per cent of global trading volume.
In addition to utilizing illegally operating exchanges, Chinese traders are also using peer-to-peer trading, exchanging cryptocurrency between wallets directly without using a middle-man. These types of transactions are done by converting fiat currency to Tether and sending that as payment in exchange for virtual currencies, with all the online actions being done through a Virtual Private Networks (VPNs).
The government has not yet taken actions to block VPNs.
Although state regulators are frequently shutting down illegal ICOs and blocking access to offshore exchanges, the government may not be able to fully eradicate access to cryptocurrency exchanges.