It seems the official ban on cryptocurrency projects in China is not doing its job. Local media outlets in China reveal that there are crypto exchanges circumventing China’s ban that outlaws crypto activities in the country. The South China Morning Post (SCMP) reports that local authorities blocked access to 124 offshore exchanges serving investors in China.
How they do it
The Shanghai Securities Times reports continued cryptocurrency activities, even as the authorities monitor them closely. Sources from the country reveal that investors use virtual private networks (VPNs) to skirt the blocking mechanism. In addition, investors use the Tether stablecoin that is very controversial. The token developers claim a 1:1 correspondence to the US Dollar by having the coin backed by a reserve of Dollars. The token mostly acts as a proxy for physical fiat currency.
According to the SCMP, the process of crypto exchanges circumventing China’s ban happens similar to purchases over e-commerce platforms. Firstly, the users initiate a ‘know-your-customer’ (KYC) where users exchange fiat currency for Tether. Banks and other payment platforms will enable the users to exchange the fiat currency in a legal way.
Here is the catch. Using a VPN, a user in China will be able to receive the tether token in an online account. Thereafter, the investor can begin using the cryptocurrency to buy other cryptocurrencies on cryptocurrency exchanges. One has to keep using the VPN in order to avoid detection.
Crypto exchanges circumventing China’s ban is evidence crypto is unstoppable
The latest SCMP report is annoying the Peoples Bank of China (PBOC). Earlier this year, the institution revealed that the war against crypto-related activities in China would soon succeed. This implies that even the follow-up ban in July fell on deaf ears. Some observers argue that the prohibition is futile since Chinese law does not proscribe the use of VPNs. The only way is to manually block the networks.
In that respect, an anonymous source tells SCMP that:
“Chinese regulators 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.”