Despite
countless
Western
media
outlets
describing
China’s
crypto
“ban,”
crypto
trade
is
very
much
alive
on
mainland
China.
In
just
one
month
last
year,
Binance
reportedly
did
$90
billion
in
Chinese
crypto
trade,
making
China
the
largest
market
for
the
world’s
largest
exchange.
How
is
this
possible?
It’s
tempting
to
turn
this
into
a
story
about
the
power
of
decentralized
money
to
elude
government
control,
and
there
is
certainly
some
truth
in
that.
But
that’s
only
part
of
the
story.
Crypto
hasn’t
disappeared
in
China
because
crypto
isn’t
completely
banned
there.
This
is
very
different
from
the
impression
you’d
get
from
Western
media
outlets,
which
commonly
refer
to
China’s
crypto
ban
or
its
ban
of
crypto
trade.
There
are
too
many
examples
to
list
here
–
just
do
a
basic
search
of
those
terms
to
see
what
I
mean.
Yet
when
I
asked
several
Chinese
industry
insiders
if
they
thought
it
was
accurate
to
say
that
crypto
is
banned
in
China,
the
answer
was
overwhelmingly
no.
Their
general
understanding
was
that
it’s
not
illegal
for
individuals
to
hold
or
trade
crypto,
but
their
activities
would
not
be
protected
by
law.
This
interpretation
isn’t
limited
to
informal
conversations.
An
article
written
by
authors
from
a
court
in
Fujian
province
notes
that
“administrative
laws
and
policies
do
not
completely
prohibit
virtual
currency
transactions.”
A
Chinese
law
firm
published
a
detailed
post
on
the
topic
that
says,
“currently,
our
country
has
no
laws
or
administrative
regulations
prohibiting
Bitcoin
trading
activities.”
Reading
between
the
lines
It’s
not
hard
to
understand
why
many
assume
that
crypto
is
fully
banned
in
China.
Chinese
authorities
have
clearly
cracked
down
on
the
crypto
industry,
and
there
are
many
crypto-related
activities
that
are
indeed
not
allowed.
But
in
China,
what
is
not
said
often
takes
on
a
special
importance.
People
tend
to
pay
attention
to
what
is
not
explicitly
restricted.
Then
they
find
room
to
maneuver
in
those
relatively
blank
spaces.
In
China,
you
need
to
look
not
just
at
what
the
rules
say,
but
at
how
people
interpret
them
So
let’s
just
take
a
moment
to
go
through
some
of
the
more
well-known
crypto
crackdowns
and
what
they
actually
said.
In
2013,
China
restricted
financial
and
payment
institutions’
involvement
with
Bitcoin.
In
2017
China
famously
banned
initial
coin
offerings,
or
ICOs.
China
also
made
clear
that
virtual
currency
exchanges
were
no
longer
welcome
to
openly
operate
there.
Before
the
2017
crackdown,
China
was
the
dominant
player
in
bitcoin
volume.
The
crackdown
did
not
stamp
out
mainland
crypto
trade,
but
it
certainly
pushed
it
into
a
gray
area.
BTCC,
China’s
longest
running
Bitcoin
exchange,
closed
down
its
mainland
Chinese
trading
operation
in
2017.
An
even
more
extensive
crackdown
came
in
2021.
This
document,
signed
by
10
Chinese
official
bodies,
has
a
wide
range
of
restrictions.
It
says
that
virtual
currency
does
not
have
the
same
legal
status
as
fiat
currency.
In
other
words,
Bitcoin
is
not
legal
tender.
It
says
that
virtual
currency-related
business
activities
are
considered
to
be
illegal
financial
activities.
Exchange
businesses
should
not
act
as
central
counterparties
to
buy
and
sell
virtual
currencies,
and
it
is
illegal
for
overseas
virtual
currency
exchanges
to
provide
services
to
Chinese
residents
through
the
Internet.
There
is
other
restrictive
language
as
well.
In
2021
China
also
cracked
down
hard
on
domestic
crypto
mining.
But,
even
amid
all
these
restrictions,
there
are
notable
gaps.
The
2021
regulations,
for
example,
do
not
appear
to
restrict
people
from
holding
cryptocurrency.
Nor
do
they
appear
to
restrict
peer-to-peer
trading
between
individuals.
Another
important
passage
in
the
2021
document
perhaps
sheds
more
light
on
China’s
official
attitude
toward
crypto.
The
passage
describes
the
legal
risks
involved
in
participating
in
virtual
currency
investment
and
trading
activities.
It
notes
that
if
someone
invests
in
virtual
currencies
and
violates
public
order
and
good
morals,
the
relevant
civil
legal
actions
are
invalid,
and
the
resulting
losses
are
borne
by
individuals.
In
other
words,
if
you
lose
your
life
savings
on
some
meme
coin,
don’t
go
crying
to
the
government
about
it.
Individual
crypto
activities
are
not
necessarily
protected
by
law,
but
that’s
not
the
same
thing
as
being
banned.
Social
stability
The
above
passages
may
look
like
splitting
hairs.
One
might
argue
that
Chinese
regulations
make
it
so
difficult
to
trade
crypto
that
it
amounts
to
an
effective
ban.
But
in
order
to
understand
the
real
situation,
you
have
to
look
not
just
at
the
rules
themselves,
but
at
how
the
rules
are
–
or
not
–
being
enforced.
It’s
no
secret
that
China’s
crypto
crackdown
did
not
stop
crypto
trade.
Chinese
traders
got
a
net
$86
billion
from
crypto
activity
between
July
2022
and
June
2023,
according
to
Chainalysis.
In
some
cases,
people
continued
to
use
accounts
that
they
had
opened
on
overseas
exchanges.
Sometimes
they
needed
a
virtual
private
network,
sometimes
they
did
not.
Peer-to-peer
trading
via
social
media
apps
like
WeChat
or
Telegram
has
also
been
possible.
There
are
stories
of
people
setting
up
companies
abroad
through
intermediaries,
and
then
using
that
overseas
company
to
complete
institutional
know-your-customer
(KYC)
identification
on
crypto
exchanges.
It’s
notoriously
difficult
for
a
government
to
contain
a
decentralized
currency
like
Bitcoin.
But
the
common
Western
media
narrative
—
that
people
are
furtively
trading
crypto
behind
the
backs
of
Chinese
authorities
–
is
not
quite
right.
Put
another
way:
If
Binance
was
doing
$90
billion
of
trade
in
China,
Chinese
authorities
probably
knew
something
about
it.
In
fact,
that
same
WSJ
article
noted
that
local
law
enforcement
worked
closely
with
Binance
to
identify
criminal
activity
among
the
exchange’s
more
than
900,000
active
users.
After
checking
online
crypto
exchanges
and
interviewing
retail
investors,
Reuters
found
that
“access
to
bitcoin
isn’t
that
difficult
on
the
mainland.”
The
fact
that
so
much
crypto
trade
survived
the
“ban”
suggests
that
China
never
intended
to
wipe
crypto
off
the
map.
Instead,
the
main
goal
was
to
raise
the
barrier
to
entry.
In
this
sense,
the
new
rules
were
extremely
effective.
Making
trade
more
inconvenient
helps
prevent
crypto
from
reaching
masses
of
unsophisticated
investors.
The
last
thing
Beijing
wants
is
for
those
same
investors
to
take
to
the
streets
to
protest
their
losses.
It
all
comes
down
to
one
of
the
key
principles
in
Chinese
policy:
Preserving
social
stability.
China
has
reason
to
be
wary
of
crypto.
It
doesn’t
want
people
to
use
it
to
evade
its
capital
controls,
for
example.
At
the
same
time,
China
has
long
embraced
the
potential
of
blockchain
technology,
and
Beijing
even
issued
a
Web3
white
paper.
The
country
has
ambitious
plans
for
its
central
bank
digital
currency.
It
is
possible
that
authorities
want
to
keep
the
door
slightly
open
to
crypto
itself,
just
in
case.
That
theory
would
help
explain
what’s
happening
in
Hong
Kong.
The
city
has
made
very
public
steps
to
establish
itself
as
a
digital
asset
hub
of
Asia,
if
not
the
world.
Hong
Kong
and
China
operate
as
“one
country,
two
systems,”
and
Hong
Kong’s
relatively
welcoming
stance
toward
crypto
has
at
least
some
degree
of
approval
from
Beijing.
Letting
crypto
thrive
in
Hong
Kong,
if
not
the
mainland,
is
a
way
for
China
to
stay
in
the
game
while
mitigating
the
risks.
In
China,
you
need
to
look
not
just
at
what
the
rules
say,
but
at
how
people
interpret
them.
Referring
to
China’s
policy
as
a
blanket
crypto
ban
oversimplifies
the
situation
in
one
of
the
most
important
markets
in
the
world.