Life in China for a cryptocurrency user is full of surprises. I’m hoping 2018 will not supply more.
Way back in 2013, when Bitcoin was reaching its then-all-time high of $1.000, China was the Wild, Wild West. No regulations at all. Buying Bitcoin was as easy as linking your bank account to an exchange like BTC China or Huobi (no identity verification required!) and clicking a few links. The exchanges even had no fees for most transactions, and were very generous with margin accounts, so it’s no wonder Bitcoin prices went through the roof.
Then the central bank, the People’s Bank of China (PBOC 中国人民银行 Zhongguo Renmin Yinhang) told all the nation’s banks they could no longer do direct business with cryptocurrency projects. That ended the easy transfers from fiat to Bitcoin (then the only game in town), and even third-party payment processors like WeChat Wallet or Alipay, were banned from funding exchanges. We had to use vouchers sold on TaoBao, or rely on LocalBitcoins.com to exchange fiat for crypto. The markets eventually recovered.
We went on like this until last January, when the regulators once again clamped down. The exchanges were forced to suspend fiat-crypto exchange activity and all withdrawals pending government investigations of their operations. Once identity verifications were in place, operations were allowed to resume by June last year.
And then in September the PBOC got strict again, banning ICOS and all fiat-to-crypto exchanges entirely. Now the only way to obtain Bitcoin (or any other crypto) in China was to use OTC exchanges or to find individuals on Telegram to do business with or use services like Uphold.
Now there is the possibility the PBOC may close even those channels. [Link goes to an article translated from Chinese.] News reports have quoted government sources as saying Beijing will force any Chinese companies with offshore exchanges to cease operations and will also force any OTC exchanges based on the mainland out of business. Banks and third-party payment processors WeChat and Alipay will also be expected to monitor P2P transactions for suspicious activity, and report them to authorities.
Whether this latest FUD (fear-uncertainty-doubt) has anything to do with the sudden drop in the crypto markets this month is hard to ascertain, but it certainly could be a factor. Some OTC providers are in Hong Kong, where the PBOC regulations do not (as yet) apply, but choking off the main fiat channels of bank transfers, Alipay and WeChat Wallet will drastically cut mainland users off from those exchanges. Chinese buyers and sellers will be restricted to finding each other on the encrypted messaging service, Telegram, which naturally is blocked on the mainland. As a VPN (also now illegal) is required to use Telegram, fewer Chinese will be able to access even that avenue.
As I mentioned last week, Uphold has an arrangement with China UnionPay — the country’s homegrown credit and debit card service — enabling users to transfer up to $150 (1,000 Chinese yuan) at a time to the service to exchange for a variety of currencies and assets. If that arrangement can stay intact, I’ll still have a way to buy cryptocurrencies, at least in small amounts, if the OTC exchanges are cut off. The same cannot be said for the many Chinese who would still want access to the cryptoverse.