China’s Crypto Paradox: Officially Banned, Unofficially Thriving

Despite its government’s hardline stance against cryptocurrencies, China remains an influential player in the crypto world. A recent report reveals the country’s seemingly paradoxical relationship with digital assets, according to newscryptocoin.

In 2021, the People’s Bank of China declared all crypto-related activities illegal. This included mining, trading, and even storage of cryptocurrencies. The ban caused an initial decline in China’s share of the global Bitcoin hashrate from 75% in 2019 to zero in July 2021. However, new data from the Cambridge Center for Alternative Finance (CCAF) shows that China’s current share stands at 21.11%, only slightly less than the 34.3% recorded in June 2021.

So why the discrepancy between official policy and actual practice? According to CCAF, the ban led to a “great migration of miners” to countries like Kazakhstan and Russia. However, crypto mining activities resumed underground in China as early as September 2021. The resurgence suggests that Chinese miners have found ways to operate in the shadows, undeterred by the ban.

In addition, China’s crypto trading activity remains robust, thanks to technological workarounds. Binance, the world’s largest crypto exchange, estimates that about 900,000 of its active users are from China. Furthermore, these users account for roughly 20% of Binance’s total platform turnover. Despite the ‘Great Firewall,’ Chinese citizens are using VPN technologies to bypass government censorship and continue trading.

China’s hold on the crypto manufacturing sector is also significant. Major companies like Bitmain, MicroBT, Innosilicon, and others are still operational. While some announced they would cease selling products in China due to regulatory uncertainty, their impact on the global market remains considerable.

Lastly, the persistence of crypto activities in China may be a result of the government’s long-term financial strategies. Some speculate that Hong Kong could become the future global center for the crypto industry, allowing mainland China to indirectly participate.

All these factors point to a complex reality. While China’s official stance aims to eliminate cryptocurrencies, the industry itself shows remarkable resilience. It appears that neither bans nor regulations can completely quash the indomitable spirit of the crypto industry in China.