Although China has banned virtual currency transactions and related activities, from the perspective of global encryption, it is undeniable that Chinese still occupy an important position in the market. It is for this reason that foreign media have always paid attention to China's policy trends and frequently turned their reporting to China's encryption industry. They pointed out that China's encryption market is still operating in different ways. This article will sort out the observations and analysis of foreign media and explain the current situation of China's encryption industry.
Mining ban
In September 2021, China issued the "Notice of the National Development and Reform Commission and other departments on the rectification of virtual currency mining activities", which clearly prohibits the development of virtual currency mining under any name, strictly prohibits the investment and construction of new projects, and accelerates the orderly withdrawal of existing projects. After that, a large number of mining companies were cleared out, setting off a wave of Chinese miners going overseas.
At that time, almost all mainstream media, led by the New York Times, reported that China had banned virtual currency mining activities. In April this year, Bloomberg again published an article saying that Chinese mining companies were moving to Southeast Asia. But it is worth noting that the latest reports from foreign media show a different point of view.
Foreign media pointed out that China has not completely banned cryptocurrency mining, but has imposed restrictions on new mining. According to the analysis of Daniel Batten, a Bitcoin ESG researcher, although official policies explicitly prohibit new mining projects, in some underdeveloped areas, policy enforcement is weak and new mining activities are still taking place.
The data seems to support this conclusion. From the data, China still accounts for at least 20% of the global hash rate, and some mining pools even account for 54% of the market share. This shows that some mines may be operating secretly without being disclosed, especially in areas with surplus electricity resources. These mines often use renewable energy such as hydropower and wind power to respond to the country's environmental protection policies.
In addition, four independent mining organizations operating in China revealed that they were actively encouraged by Chinese authorities to help solve heat recovery and redundant renewable energy monetization, which means that to a certain extent, China is allowing a certain number of crypto miners to resume work. However, considering capital controls, the authorities only resumed mining operations that are small and based on renewable energy.
Local provincial governments often support grey areas that are not supported by the central government for economic viability reasons. Some provincial governments have issued effective “mining licenses” that allow mining companies to work with provincial governments in exchange for the right to use their recovered heat.
Medium of exchange
Despite the ban on trading, it is increasingly evident that Chinese crypto users are circumventing the ban through P2P trading platforms. Many users use social media to conduct private transactions, exchanging RMB for cryptocurrencies through bank transfers or third-party payment tools. For platforms, providing users with P2P access is a gray area, and regulators may crack down on overseas exchanges and their executives, but these actions are not always prosecuted.
According to crypto professionals, in China, many young people conduct P2P transactions through well-known exchanges such as OKX and Binance. Although these platforms cannot be downloaded directly from official app stores, users can still obtain them through app stores in other countries. Behind these transactions, VPN has almost become a basic choice for ordinary users, allowing them to access websites blocked by the "firewall".
Airdrop Industrialization
In addition to P2P trading, Chinese users also receive cryptocurrencies through asset airdrops, and can earn lucrative income from multiple airdrops. According to at least three local sources, China's airdrop industry has reached a professional level, with more and more users participating. Similar to how Bitcoin mining was once done by private individuals using 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 profitability.
The rise of airdrops can be attributed to the era of mobile money making during the pandemic. When people began to discover that they could make money with their phones, it was natural to think of using hundreds of phones to make money at the same time. Airdrop parties trade on emerging protocols through automatic robots and record manually with multiple devices. Of course, the protocol will also be aware that users deploy robots to automatically trade and brush up to get airdrops, and will take measures to restrict them. In the dynamic balance between the two, airdrop parties are taking new methods to bypass interception. Some Chinese airdrop parties will hire students to trade in order to complete on-chain tasks as much as possible.
CBDC alternatives
In any case, any crypto business in China always has the risk of being suddenly shut down, and a mere notification can ban a business. Interestingly, there are often rumors that China will lift the crypto ban, such as TRON founder Justin Sun’s mysterious post recently: “China lifts the ban on cryptocurrencies, what is the best emoji?” This news quickly caused a sensation in the cryptocurrency community, intensifying speculation that China will lift the Bitcoin ban. However, judging from the consistent tone of China’s policies, the possibility of this speculation is almost zero.
In addition, the emergence of the digital RMB has also made overseas people think that China's cryptocurrency recovery is hopeless. China believes that CBDC is the only legal digital currency, and all other digital currencies, including Bitcoin, cannot be used for payment. This is the decision of the Central Committee, and there is no more authoritative than this.
As for the current policy relaxation in Hong Kong, industry insiders believe that although transactions are still continuing, the demand for cryptocurrencies in China is currently low, and mainland Chinese citizens are not allowed to invest in the open virtual asset ETFs unless they have temporary or permanent residence permits.
In this context, some users may continue to use more secretive cryptocurrency trading methods to avoid potential regulatory risks. For grassroots and local governments, they may seek a balance between central policies and local economic interests to promote regional development.
in conclusion
In general, the Chinese crypto market remains active despite the policy ban. The booming of secret mining operations, P2P transactions, and airdrop activities shows that the crypto industry still has strong viability and market demand. At the same time, the promotion of central bank digital currency will also have a profound impact on this situation. How to balance regulation and innovation in the future will be an important issue facing the Chinese crypto industry.
Overall, there is room for discussion in foreign media reports, but the situations they summarize have been verified and are more detailed than previous mainstream foreign media reports. Of course, no one knows the domestic market better than the people of their own country. Overseas views will more or less be integrated into their own values and are only for entertainment. However, it is also quite interesting to understand the outside world's views on oneself.
