Source: Gyro Finance
Although China has explicitly banned virtual currency transactions and related activities, from a global encryption perspective, it is undeniable that the Chinese still occupy an important position in the market, but in recent years this position has been gradually invaded by the Western world. It is precisely for this reason that foreign media have always paid attention to China's policy trends and frequently turned their reporting horizons to China's encryption industry.
For various reasons, some reports lack reality and are biased, even seeming a bit absurd. They contain various subjective imaginations about China. For example, a previous Wall Street Journal article mentioned: "China's inland remoteness Crypto users in the province conduct private crypto transactions through laundromats." The fact is that due to cultural differences, it is difficult for China to even see laundromats, a common product overseas, let alone meet secretly in the store.
Just recently, the well-known overseas encryption media Bitcoin Magazine and Cointelegraph Magazine published articles by Daniel Batten and Yohan Yun respectively, both of which reported and investigated the Chinese encryption industry. In their description, China has not banned the mining industry, encryption airdrops are developing rapidly locally, and VPNs and exchanges are bridges to underground encryption.
1. Is the mining industry not banned?
In September 2021, China issued the "Notice of the National Development and Reform Commission and Other Departments on Regulating Virtual Currency "Mining" Activities", which clearly prohibits the development of virtual currency "mining" in any name, strictly prohibits the investment and construction of new projects, and accelerates the development of existing projects. The project exits in an orderly manner. After that, a large number of mining companies retreated, setting off a wave of Chinese miners going overseas.
At that time, almost all mainstream media, including the New York Times, reported that China had banned virtual currency mining activities. In April this year, Bloomberg once again published an article stating that Chinese mining companies were moving to Southeast Asia. However, the reports of the two crypto media this time are quite different. Both put forward similar views, saying that "China has not banned the mining industry."
Bitcoin ESG researcher Daniel Batten believes that the policy only prohibits new mining, rather than a legislative prohibition. He also used different regional policy implementation capabilities to illustrate, emphasizing that in underdeveloped areas, policy implementation is not in place and social resources dominate, so new mining activities have begun.
The data appear to support this conclusion. Data-wise, China still accounts for at least 20% of the global hash rate. A chart published by CryptoQuant founder Ki Young Ju in July showed that Chinese mining pools accounted for 54% of the global hash rate. He pointed out, "Although not all participants in these mining pools are Chinese, some mining farms may still be operating secretly in China, but the data will not be made public."
Source: X
Daniel conducted interviews with four independent mining organizations operating in China, including HashX Mining and three others who asked not to be named. All four mining companies said they were actively encouraged by the Chinese authorities to help solve heat recovery and redundancy issues. Monetizing excess renewable energy. This means that, to a certain extent, China is allowing a certain number of crypto miners to resume work. But given capital controls, authorities have only reinstated smaller mining operations based on renewable energy.
Taking the mines in Inner Mongolia as an example, a mining machine dealer confirmed, "With the economic downturn, heavy industry has left Inner Mongolia and Xinjiang, resulting in excess power supply." The government will encourage mines to operate here and promote the development of renewable energy to gain profits. Specifically, Bitcoin mining farms in Inner Mongolia usually have only 200-500 mining machines, with a power generation capacity of about 1MW, all using clean energy such as water energy, wind energy or solar energy.
The interview also revealed other situations. First, although a large amount of computing power has migrated to other countries (initially the United States, and recently Ethiopia), a large amount of new computing power has also flowed into China since China’s “ban”; second, China no longer Conduct off-grid mining operations. This kind of mining efficiency is too low and easily detectable. It consumes baseload energy and is not in line with the carbon neutrality vision proposed by the authorities. The direct impact of this is that the emission intensity of China's mining industry has significantly reduced after the "ban"; 3. Mining mainly relies on hydraulic power and micro-hydraulic power. In cities such as Xi'an, Wuhan, Beijing and Xining, the cost of hydropower generation will be very low during the rainy season.
It is worth noting that centralized grid-connected mining is becoming increasingly common, and retail mining still exists. Although the high electricity bills paid by individual miners mean that their profit levels are low or even at a loss, their primary purpose is to conduct foreign exchange exchange, by transferring money out of China, converting it into ASIC and electricity costs, thereby generating BTC, and ultimately Convert to US dollars.
Daniel mentioned that due to economic feasibility considerations, local provincial governments often support gray areas that the central government does not support. He also emphasized that some provincial governments have issued valid "mining licenses" and mining companies can work collaboratively with provincial governments in exchange for the right to use them to recover heat energy.
Compared to Daniel who only focused on mining, Cointelegraph's report focused more on the overall industry. It mentioned that mainland crypto users have used other methods to bypass the ban, and airdrops have achieved advanced industrialization. The following are some of its reports:
2. VPN and exchanges become media
Lowell, a newly graduated college student who is participating in cryptocurrency full-time, broke the news that social media or cryptocurrency exchanges provide P2P trading channels. Users can purchase cryptocurrency with RMB through bank transfer, WeChat Pay or Alipay. OKX and coins An are two of the most popular exchanges. As shown in the figure below, Binance offers RMB P2P sales in China.
Source: Gyro Finance
「我可以訪問這兩個應用程式。我用的是iPhone，可以在中國香港或其它國家應用商店進行下載，」洛厄爾表示，並補充道，「但蘋果大陸的應用商店沒有這兩個應用program."
Compared with foreign users, application access in China is subject to a stricter network environment. A system called the "Great Firewall" blocks access to many popular domain names such as Google and Facebook.
Cointelegraph invited a source in mainland China to test access to cryptocurrency exchanges. Testing confirmed that users cannot access the Binance and OKX websites without using a VPN, but the mobile apps of these exchanges are accessible without a VPN. Some projects such as MakerDAO prohibit users from using VPN to access the protocol, mainly to avoid prosecution by US regulators rather than Chinese regulators.
Zhao Wei was once the CEO of Beijing-based analytics company TokenInsight, and later moved to Singapore to found the DeFi project BitU. He mentioned that using VPN is almost second nature for mainland Internet users.
Zhao Wei said: "If you want to access Google or YouTube, VPN is basic." The same is true for DeFi platforms. Joshua Chu, co-chairman of the Hong Kong Web3 Association, mentioned that for platforms, providing users with P2P access is a "grey area." , regulators may crack down on overseas exchanges and their senior executives.
“Even if these actions don’t always lead to prosecution, they can trigger significant legal fees, especially when they enter China, as in cases like the detention of a senior Binance executive in Nigeria,” Joshua said.
3. The industrialization of airdrops develops rapidly
Cryptocurrency trading in China is limited to P2P options, but that’s not the only way to acquire coins.
Lowell has made handsome profits from airdrops, including $50,000 from the Ethena $ENA campaign and $40,000 from StarkNet.
According to at least three local sources, China’s airdrop industry has reached a level of professionalism.
Similar to how Bitcoin mining once only required private use of laptops in bedrooms, but eventually developed into a large-scale industry as companies invested in professional equipment, the airdrop industry is also investing in advanced technology and equipment to maximize Maximize profitability.
Zhao Wei attributed the rise of airdrops to the era of "money-making" during the epidemic, especially after the emergence of large-scale applications such as STEPN. "When people begin to discover that they can make money with their mobile phones, they will naturally think of using hundreds of mobile phones to make money at the same time."
Airdrop parties conduct transactions on emerging protocols through automated bots and record manually using multiple devices. Of course, the protocol will also be aware of users deploying robots to automatically trade wash volume to obtain airdrops, and will take measures to limit it.
In the dynamic balance between the two, airdrop parties are adopting new methods to bypass interception, and some Chinese airdrop parties will hire students to conduct transactions to repeat on-chain behaviors as much as possible. “My friends are making a lot more money on airdrops than I am because they hire a lot of college students to trade for them,” Lowell mentioned. "I have about 30 or 40 accounts, but they have 200 accounts."
4. Industry risks still exist, CBDC is regarded as a substitute
But no matter what, there is always the risk of a sudden shutdown for any crypto business in China.
Zhao Wei mentioned: "A very good friend of mine had a similar thing happen before. Just a notification can ban the business."
On the other hand, P2P traders are also at risk due to the lack of trustworthy intermediaries. They purchase cryptocurrencies directly from strangers, often without knowing the origin of the assets, which carries the risk of unknowingly participating in money laundering or being convicted in connection with other illegal activities.
Because of such risks, Lowell said she prefers to deal with people she knows, even if the options will be limited. "When I trade with my friends, I know they won't do anything illegal and I'm not at risk of arrest. I'm more likely to sell $USDT to someone I know, but they won't always There's demand, so I use exchanges as well," Lowell said.
What’s quite interesting is that although there are often rumors that China will liberalize crypto transactions, and Galaxy Digital CEO Mike Novogratz also commented on this some time ago, judging from the consistency of China’s policies, this speculation is unlikely Almost zero. In addition, the emergence of digital renminbi has also made overseas people believe that there is no hope for China’s cryptocurrency recovery. Winston Ma, an adjunct law professor at New York University, mentioned, “China believes that CBDC is the only legal digital currency, and all other digital currencies, including Bitcoin, cannot be used for payment. This is a decision of the Central Committee, and there is no comparison. This is more authoritative.”
In response to the current policy liberalization in Hong Kong, Zhao Wei also gave his opinion that although transactions are still continuing, China's current demand for cryptocurrency is low, and Chinese citizens are not allowed to invest unless they have a temporary or permanent residence permit. Opened virtual asset ETFs. "The trading volume is so bad because most people in China or Hong Kong who are willing to buy Bitcoin or other cryptocurrencies have already done it through other means."
5. Conclusion
On the whole, although the two articles still have issues that are debatable, the general situation has been verified and is more detailed than the previous descriptions by mainstream foreign media. Of course, no one understands the local market better than the Chinese. Overseas opinions are more or less mixed with one's own values, but it is just for fun. After all, it is also interesting to understand other people's opinions on oneself.
[Disclaimer] There are risks in the market, so investment needs to be cautious. This article does not constitute investment advice, and users should consider whether any opinions, views or conclusions contained in this article are appropriate for their particular circumstances. Invest accordingly and do so at your own risk.
This article is reprinted with permission from: "Foresight News"
Original author: Gyro Finance
