The Government of China and its central bank, the People's Bank of China (PBoC) have imposed a strict ban on encryption in September 2017. However, the local market of the country's cryptocurrency remains active, with hotels, exchanges and over-the-counter (OTC) trading platforms to support digital resources.
Local authorities have banned commercial banks from dealing with overseas cryptographic exchanges and OTC trading platforms, forcing financial institutions to censor transactions suspected of being linked to encrypted companies.
However, with VPN, stablecoin, cryptographic exchanges based on Hong Kong, OTC platforms and savings accounts abroad, it has become increasingly difficult for the Chinese government to restrict cryptography.
Some new photos of the "ETH Hotel", the first hotel in China to accept $ ETH payment. There is also Bitcoin!
Shared by TooYoungTooSimple on Wechathttps: //t.co/bBnYRhkOoP pic.twitter.com/gG1dt7o7FI
– cnLedger (@cnLedger) September 28, 2018
Crypto Market of China is still very active
September 25th Ethereum Hotel, the first hotel in China that accepts Ethereum (ETH) as a payment method, according to reports, they opened their business in the National Scenic Area of Four Girls Mountain (Sichuan Province).
The launch of the institution took place after the government's decision to ban all cryptocurrency activities, including events. Previously, as reported by CryptoSlate in August, local financial regulators in China have also requested Alipay, the $ 60 billion fintech payment app, to block any transactions sent to the OTC cryptography platforms.
At the moment, Financial News, a publication affiliated to the People's Bank of China (PBOC), has revealed that the ICO and the encryption activities in China have not completely dematerialized following the official ban of September 2017 .
"ICOs and virtual currency trading have not completely withdrawn from China after the official ban … after the closure of virtual national exchanges, many people have turned to overseas platforms to continue participating in virtual currency transactions", we read in the report.
Indeed, many sources and companies including Terence Tsang, a digital goods trading operator based in Hong Kong and Taiwan, have said that encryption in China has become more popular since the ban.
According to Tsang, the government's prohibition of encrypt trade was only aimed at trade within mainland China, which pretended to be foreign companies but operated within the country. He stressed that with regard to OTC platforms and exchanges in foreign markets such as Hong Kong, the Chinese government did not effectively enforce strict policies to prevent trade.
Tsang said he spoke to SCMP, one of Hong Kong's leading media:
"The last warning and the potential increase in the monitoring of foreign platforms are aimed at a series of small exchanges that had declared to be foreign entities, but actually operate in China claiming to have outsourced their activities to a Chinese company" .
It is extremely difficult for the Chinese government to completely ban all encryption activities in China, because most traders acquire stablecoin like Tether, Gemini Dollar and PAX and then invest in encryption through exchanges of only cryptocurrency.
To completely ban encryption, local financial regulators will have to censor wire transfers from China to Hong Kong and other foreign markets, which is incredibly impractical as investors can simply create hedging company savings accounts to receive funds.
A source close to a major exchange in Asia said that the only real way for the Chinese government to stop encryption is to close the VPNs.
The source said:
"The Chinese regulators certainly have the technical ability to shut down VPNs, but traditionally requires many conversations with various stakeholders to reach a consensus on how to configure a firewall, which lengthens the process."
What happens to China?
Cryptocurrency trading activity in China has increased so rapidly in the last nine months to a point where companies have started to raise millions of dollars in seed funding to provide insurance and security services to OTC trading platforms of digital assets in the country.
The growth of the local market is expected to continue, despite the existing ban, even with the government's restrictions on trade.
Cover photo of Hanson Lu on Unsplash
Disclaimer: The opinions of our writers are exclusively their own and do not reflect the opinion of CryptoSlate. None of the information you read on CryptoSlate should be taken as investment advice, nor does CryptoSlate approve any projects that may be mentioned or linked in this article. Buying and exchanging cryptocurrencies should be considered a high-risk activity. Please do your due diligence before taking any action related to the contents of this article. Finally, CryptoSlate assumes no responsibility in case of loss of money in the trade of cryptocurrencies.
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