Chinese Traders Find Ways to Avoid Crypto Trading Ban with Tether and VPNs
The Chinese government may have banned cryptocurrency trading and ICOs, but those actions did not stop investors in the country to buy and sell cryptos.
A report by the South China Morning Post claims that Chinese cryptocurrency investors are using Tether (USDT) and virtual private networks (VPNs) to avoid the tight government regulations on digital currency trading, including a ban on more than 120 foreign exchanges.
The report cited data from the Shanghai Securities News, a newspaper linked with the country’s financial regulators, stating that Chinese traders convert their yuan to USDT to leverage what insiders describe as “client-to-client” trades, which are similar to P2P transactions of fiat for Tether that usually transpire on specialized online platforms with bank transactions.
The scheme allows traders to leverage a VPN to gain access to their desired cryptocurrency exchanges and trade in digital assets like in any country that allows crypto trading. The report claims that Chinese regulators do not have the technical capability to block these trades from gaining access to VPNs effectively.
“Chinese regulators definitely have the technical ability to shut down VPNs. However, traditionally it takes numerous conversations with different stakeholders to reach a consensus on configuring a firewall, which lengthens the process,” the report added.
Exchanges have also found a way to skirt around the ban by transferring to other countries or reincarnating their businesses under different domain names. This allows them to continue prospering despite the crackdown imposed since September last year.
Others exchanges move their servers outside of mainland China and register their legal entities in crypto-friendly regimes like Ukraine or Malta.
The report quoted TideBit chief operating officer Terence Tsang who runs a centralized digital currency exchange in Taiwan and Hong Kong as saying:
“The latest warning and potentially increased monitoring of international platforms are targeted at a batch of smaller exchanges that had claimed to be foreign entities but are operating in China claiming they have outsourced their operations to a Chinese company. Those exchanges whose website landing pages are in Chinese have drawn particular scrutiny by regulators.”
China’s clampdown on cryptocurrency trading intensified anew when the Guangzhou Development District, an exclusive economic zone in China’s Guangzhou district, ordered last month a ban on promotional events involving digital assets after capital Beijing made an initial move.
The crackdown is aimed at maintaining “the security and stability of the financial system” by prohibiting all activities that promote digital currency within the zone.