The current state of crypto in China: P2P transactions to circumvent bans, secret mining operations, and the impact of CBDC

Although the Chinese government explicitly prohibits virtual currency trading and related activities, the Chinese market still occupies an important position in the global cryptocurrency field. In recent years, with the rise of Western countries, China’s influence in the cryptocurrency market has gradually weakened. However, China's policy trends are still attracting attention from the outside world, especially the development of the encryption industry.

Fictional Prejudices and Realistic Challenges

Foreign media often report on China’s cryptocurrency market, but some reports cause misunderstandings due to cultural differences. For example, some media claimed that crypto traders in remote areas of China conduct underground transactions through laundromats. Such a statement is unimaginable in China. In fact, laundromats are not common in China, and similar reports are mostly based on misunderstandings by foreign journalists.

Recently, Bitcoin Magazine and Cointelegraph published two articles respectively focusing on the Chinese cryptocurrency market, discussing the operation of underground mines and the rapid development of cryptocurrency airdrops.

China’s mining industry

In September 2021, China issued a policy banning virtual currency mining. Since then, a large number of miners have moved overseas. However, Bitcoin researcher Daniel Batten and other reports believe that China has not completely banned mining. Although the central government strictly enforces the mining ban, in underdeveloped areas, policy enforcement is insufficient and some small mines are still operating. Data shows that China’s mining activities still account for 20%-54% of the global hash rate.

In addition, mining activities are concentrated in renewable energy areas such as hydropower and wind power. These mines have received support from local governments to deal with excess power resources. While large-scale mining operations are restricted, some local governments provide licenses for smaller-scale mines that rely on renewable energy.

VPN and P2P trading

Due to the ban on cryptocurrency exchanges, China’s cryptocurrency trading mainly relies on P2P trading and VPN technology. Users can purchase cryptocurrencies through methods such as WeChat Pay or Alipay, and exchanges such as OKX and Binance have become major platforms for P2P trading. Although using a VPN has become a daily routine for crypto users, there are still risks associated with trading in this gray area.

The development of airdrop industry

As a way to obtain cryptocurrency, airdrops are developing rapidly in China, and some users even rely on automated technology and a large number of devices to make profits from airdrops. As the cryptocurrency market evolves, airdrops have gradually become a specialized industry, with different players constantly innovating to increase returns.

CBDC and the future of cryptocurrencies

The Chinese government is vigorously promoting the digital yuan (CBDC), which is regarded as the only legal digital currency. Experts point out that China is unlikely to relax its policy on cryptocurrencies as this would run counter to the government’s goal of promoting a CBDC. Although Hong Kong has relaxed restrictions on virtual assets, for mainland China, CBDC seems to completely block the legalization of cryptocurrencies.

Conclusion

Overall, there is still a certain degree of underground activity in the Chinese cryptocurrency market despite policy bans. Although external reports are sometimes biased, the actual situation shows that China's encryption industry is still developing. As the regulatory environment continues to evolve, the future direction of China's cryptocurrency market still requires continued attention.