An in-depth look at China’s biggest ban to date – Cointelegraph Magazine


This weekly news summary from China, Taiwan, and Hong Kong attempts to plan the most important news in the industry, including influential projects, changes in the regulatory environment, and enterprise blockchain integration.

Well, it finally happened. Encryption apocalypse driven by China’s regulation. They started restricting miners earlier this summer, and then finally tightened the screws of the exchange. This week, the last nail in the coffin came from more regulations from the People’s Bank of China, which led many platforms to announce that they would no longer accept Chinese users.

Banned again

new rule From a legal point of view, the things handed down from the People’s Bank of China are very clear to companies. One of the main points is that commercial activities related to cryptocurrencies are illegal, and this ruling casts doubt on the country’s long list of projects, exchanges and financial service providers.

Many projects react immediately by eliminating WeChat communities and even internal messaging groups on the domestic network, preferring to operate through VPNs and more privacy-conscious chat applications. The leading exchange Huobi ranks third in the global trading volume rankings. Announce They will permanently close Chinese user accounts at the end of the year.

Chinese users on Huobi must make a decision before closing their accounts on December 31.

If true, this will be a huge blow to the exchanges that have long provided high-standard services to the Chinese community. The services include deep liquidity, extensive assets and almost no security risks. Experienced Chinese investors may still suspect that Huobi will make such drastic changes, because in the Chinese world full of repression and political stance, announcements and policies may change quickly.

Troubles of overseas players

Perhaps the most worrying aspect of the announcement by the People’s Bank of China is that overseas cryptocurrency exchanges that provide services to Chinese residents are also regarded as illegal financial activities. In addition, it stated that there are legal risks involved in cryptocurrency investment transactions. This caused some concerns among employees of crypto companies, who suddenly worried that they might become the next target of law enforcement agencies.

Binance quickly pointed out that since 2017, the Binance.com domain name has been blocked in China, excluding it from regulatory discussions. It also announced that it would no longer accept new registrations from Chinese users, but made no mention of existing accounts. BitMart, another exchange linked to China, also announced that it will close the accounts of users in mainland China on November 30. Biki, a smaller exchange, announced that it will completely end its exchange business.

For smaller exchanges, operational risks are quite high, especially because many exchanges have diversified business models, including investment, mining or other financial services. Due to the rapid growth of top CeFi platforms and the widespread adoption of decentralized exchanges, small CeFi exchanges in this field may also feel increasingly squeezed out. Closing the exchange may not mean a complete exit from the industry, but just abandoning high-risk and under-performing business lines.

So, what is left of Chinese traders?

Individual users are still in a gray area because the announcement does not strictly state that it is illegal to hold cryptocurrencies. This seems unlikely, because the overall trend is to try to protect citizens by targeting companies, and we have seen this in many different vertical industries this year, including education and entertainment.

Another unclear area is Chinese users living abroad. In addition to a large number of overseas Chinese citizens, many people are still able to use VPNs to fake their locations. Assuming that these users can still pass the IP ban, it can provide more technology-savvy holders with a possible way to continue trading on the CeFi platform.

Exchanges that do not have any business in China may see this as an opportunity because regulators have little recourse against them. At this stage, it appears that Chinese regulators may have succeeded in preventing many smaller retail cryptocurrency activities. However, large players are already overseas or are looking for ways to circumvent these new obstacles. If they have been working in this field for a while, they will be very familiar with the ebb and flow of regulations.

Decentralization has no answer

The biggest beneficiary in the short term may be the DeFi agreement.China’s suppression of one or two punches and DYDX’s liquidity rewards cause The adoption rate of StarkWare-based derivatives platforms has soared. According to data from Similarweb, China is the most visited region of the site, with a market share of over 10%. Users who use VPNs from China may account for more. It is not clear whether this will be a long-term solution, or whether the substantial increase is more speculative if it is to obtain DYDX tokens as a reward.

China and Hong Kong are leading the way in terms of visitors to the DYDX website. Source: Similarweb

Follow the party line

Seeing an opportunity to show their best behavior, e-commerce platform Alibaba Announce The platform can no longer be used to sell cryptocurrency mining machines. Considering that the company has been scrutinized by financial regulators, this position is not surprising. After their p2p lending model sparked a high-profile quarrel between founder Jack Ma and financial watchdogs, the organization is reorganizing.





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