One of the more interesting aspects of cryptocurrency is its resilience. Being a digital currency, it is quite difficult to completely regulate or control. Lawmakers in China have learned about this the hard way as, despite their best efforts, individuals have still found ways to get around their restrictions and deal in crypto.
Getting around Restrictions
According to an August 23 report by the Shanghai Securities Times, which is affiliated with China’s regulatory bodies, increased measures have had to be taken to crack down on cryptocurrency activities in China.
These steps include blocking access to over a hundred crypto-exchanges located outside China which are being used by Chinese investors.
In September 2017, a ban was put in place by the Chinese government that prohibited the trading of cryptocurrencies. Despite this ban, the trading of cryptocurrency has continued, albeit through loopholes.
One of the major loopholes has been traders reinventing themselves as foreigners to get around the ban. This involves registering websites under foreign domain names and also registering their servers outside the country with their legal entities being kept offshore.
This allowed them to conduct their business while skirting around the ban.
While the new restrictions are hoping to put an end to crypto trading permanently, it seems unlikely.
“The latest warning and potentially increased monitoring of foreign platforms are targeted at a batch of smaller exchanges that had claimed to be foreign entities, but are in fact operating in China claiming they have outsourced their operations to a Chinese company,” said Terence Tsang, the CEO of TideBIt, a crypto trading platform.
Since the new measures were put in place, some immediate effects could be felt by Chinese investors. Trading volume in platforms frequented by Chinese investors dropped 33 percent.
However, stopping trade completely would involve blocking access to the trading websites, which is easier said than done
Since the platforms are registered outside China, the Chinese government will be unable to shut them down and since they are accessed peer-to-peer, the government cannot block access to them.
The trades take place when a client and merchant swap fiat currency which is converted to tether, a US Dollar-backed currency.
Payments are then made via bank transfers and other third-party payment platforms.