The Landscape of Cryptocurrencies in China
It shouldn’t come as a surprise to learn that cryptocurrencies have been wildly popular almost everywhere in the world.
This is because they offer a decentralized payment method that can be used anywhere on Earth, without having to abide by international regulations.
However, cryptocurrency’s immense popularity has not sat very well with the Chinese government. In fact, the government has moved to ban all cryptocurrency trading activities within the country, as well as any events related to digital currency by using what is known as geo-blocking.
But despite this, Chinese authorities still appear to be embracing blockchain technology, the underlying tech that supports cryptocurrencies.
So much so that China Center for Information Industry Development has started releasing ratings on different digital currencies based on three different aspects, which includes the crypto’s basic technology, its application, as well as its innovation.
Currency Vs. Asset
The Chinese government has banned the use of digital currency due to the fact that they believe there should only be one entity allowed to issue currency.
However, China still allows its citizens to hold cryptocurrency as an asset, although they are not allowed to trade it or use it as a method of payment.
The Future of Cryptocurrency in China
Despite their aversion to cryptocurrency, back in 2016, the Chinese government added blockchain development to its Five-Year Plan.
Then, at the beginning of 2018, China’s president, Xi Jinping, announced that his government would be committing $1.6 billion towards blockchain development in China.
So, although China continues to outlaw anything seemingly related to cryptocurrency, its government plans to accelerate the development of blockchain technologies. This has left many wondering how blockchain innovation will be possible from within a country with such stringent regulations.
Two of the most popular payment apps in China are Alipay and WeChat Pay. These platforms have gained so much popularity in recent years that even cab drivers and street performers are starting to accept payment electronically through these apps.
Today, mobile payments have bloomed into a massive $16 trillion dollar market, with over 90% of people living in larger Chinese cities stating that they use Alipay and WeChat Pay as their preferred payment method.
So, with Chinese citizens already fervently using mobile payment platforms, it’s safe to say that consumers could be able to easily transition over to using digital currencies.
Bypassing Chinese Geo-Restrictions
Despite the crackdown from the government, Chinese citizens are still determined to use and trade cryptocurrencies. To this day, the government has shut down more than 120 crypto-trading platforms, but that hasn’t stopped the people from wanting to get their hands on digital currencies.
Fortunately, there are a couple of tricks that traders use to bypass Chinese geo-restriction and continue trading. Let’s take a look.
Exchanges Operating Outside of China
By creating themselves as a legal entity based outside Chinese borders, exchanges are still legally allowed to operate despite the local ban.
This is the method used by many Chinese exchanges shut down by the government, which has allowed them to continue their operations.
By using a stablecoin known as Tether (USDT), Chinese investors are still able to enter and exit the cryptocurrency markets.
Essentially, traders are able to use a cryptocurrency exchange that operates outside of China to exchange their fiat currency for Tether. Tether can then be traded for other cryptocurrencies such as Bitcoin and Ethereum.
Instead of directly accessing a cryptocurrency platform, traders are using proxy sites to access cryptocurrency platforms for them.
When you use a proxy site, all of your computer’s data is routed through the proxy site’s server. This means that as long as the server is located outside of China, Chinese traders will be able to access cryptocurrency platforms by hiding behind the server’s IP address.
Using VPN Services
The easiest and safest way that Chinese traders continue to access and trade cryptocurrency is by using VPN services, such as VPNpro’s reviewed Avast VPN.
Essentially, these services hide your IP address, making it impossible for authorities to tell where your computer or device is actually located.
VPNs, or Virtual Private Networks, create secure, encrypted tunnels, which route your computer’s data anonymously back and forth between the server. When using a VPN, the network will automatically assign your data to the same IP address as the server that you’re connected to.
This same server is also used by everyone else who is connected to the VPN, therefore, it’s completely impossible to track your location since there will be hundreds, maybe even thousands, of other people using the same IP address at the same time.
Therefore, by using a VPN to make cryptocurrency transactions, there’s actually very little the Chinese authorities can do to stop you.
Furthermore, as long as the server is located in another country, your computer or device will appear to be located there as well. This allows you to access cryptocurrency exchanges from within Chinese borders, despite the government's efforts to prevent crypto-trading.