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StoneBridge Ventures Explores Crypto Ban in China: Below-Market Opportunities Amidst Regulatory Challenges

China’s crypto ban creates below-market opportunities as exchanges, including Binance, operate underground, selling Bitcoin at prices below the global average while users navigate risky endeavours to bypass restrictions.

London, UK, November 20, 2023 – The intersection between Bitcoin and China has always been intricate, marked by the country’s significant role in the cryptocurrency mining industry. However, the Chinese government’s crackdown on crypto, particularly Bitcoin, led to a ban on trading and mining activities. As stated by Joe Corbin, an expert from StoneBridge Ventures, exchanges in China need to sell their Bitcoins because of the Chinese government’s ban on crypto. Due to this, some of them are selling at a price lower than the market.

China’s Attempt to Regulate Bitcoin Mining and Cryptocurrency Bans

China was among the first governments to attempt to impose restrictions on bitcoin mining, in part because of the cryptocurrency’s vulnerability to capital controls in a closed system and the volume of mining activity that takes place there.

Back in 2021, the Chinese government imposed a comprehensive ban on all cryptocurrencies and related transactions within its borders. This decision was primarily driven by concerns over the extreme volatility of cryptocurrencies and the possibility of using them for illegal operations like money laundering. The ban encompassed not only domestic cryptocurrency exchanges but also extended to transactions made through offshore exchanges that targeted Chinese citizens.

China’s Cryptocurrency Regulations: The “Key Prohibition Rules”

In China, some courts have recognized Bitcoin as virtual property and a legally defensible virtual commodity, and this stance has been a part of the Chinese legal system for quite some time. The “Key Prohibition Rules,” which dictate cryptocurrency regulations in China, clearly state that activities such as accumulating funds through initial coin offerings (ICOs) and acting as an intermediary for the exchange of cryptocurrencies for cash or other legal tender are strictly prohibited.

Consequently, there are no major Bitcoin exchanges headquartered in China. Nevertheless, several courts have affirmed the right of Chinese citizens to own Bitcoin as a virtual asset. The focus of these regulations and bans is primarily on the use of Bitcoin as a substitute for legal tender, but this is more at the application level rather than the fundamental network level.

It is unlikely that the Chinese government will actively pursue individuals who are Chinese citizens and own Bitcoin. The primary targets of these regulations are centralized companies, particularly Bitcoin miners and exchanges. Those who own Bitcoin and perhaps even operate a Bitcoin node are generally not the focus of enforcement actions.

Crypto Exchanges Operate Underground in China Despite Ban: A Risky Endeavor for Users

Despite China’s strict ban on cryptocurrency trading and mining, several exchanges, including prominent ones like Binance, OKX, Coinegg, and Bitfinex, continue to operate within the country’s borders. In May 2023, after two years of crypto ban in China, the world’s largest cryptocurrency exchange, Binance, reported $90B worth of crypto trading from its Chinese users in only 30 days. The surprising thing is that Binance.com is inaccessible in China, but Binance has assisted Chinese users by redirecting them to sites with Chinese domains before granting access to the platform, helping users bypass restrictions.

As for the other exchanges, the operations occur underground, with users resorting to VPNs to access these platforms. Additionally, some users have taken extreme measures, such as forging bank documents and providing false addresses, to evade the Know Your Customer (KYC) requirements imposed by these exchanges. This risky behaviour raises concerns about the legality, security, and ethical implications of participating in crypto trading under such circumstances.

Chinese Crypto Ban: Impact on Exchanges and Bitcoin Liquidation

Amidst the Chinese crypto ban, exchanges in China navigate challenging regulatory terrain, compelled to sell Bitcoin holdings in compliance. This situation may lead these exchanges to offer Bitcoin at prices below the global average. Consequently, global investors might capitalize on the opportunity to purchase Bitcoin at a reduced rate when Chinese exchanges liquidate.

The Chinese government’s cryptocurrency regulations can significantly impact the market, potentially triggering the liquidation of Bitcoin’s long positions on exchanges. Stricter measures or a crypto ban announcement from China may generate negative market sentiment, causing a decline in Bitcoin prices. Traders with long positions could face exchange-enforced liquidation to mitigate losses amid rapid asset value drops.

According to reports from the cryptocurrency information platform Coinglass, the liquidation of Bitcoin long positions on Binance has amounted to $89.07M, while on OKX, it stands at $82.19M, and on Huobi, it registered at $13.84M in the last 24 hours. As of writing, Bitcoin is traded globally at $ 36,478.80 USD per (BTC / USD) with a current market cap of $713,474,310,872.

In conclusion, China’s stringent ban on cryptocurrency trading and mining has placed Chinese crypto exchanges in a challenging position. Forced to comply with regulatory restrictions, these exchanges may sell Bitcoin below the global market average. This situation offers a unique opportunity for global investors to acquire Bitcoin at reduced prices. Despite the ban, some exchanges, including major players like Binance, persist in operating underground, raising legal and ethical concerns. Meanwhile, the liquidation of Bitcoin’s long positions on various exchanges underscores the impact of China’s regulatory measures on the cryptocurrency market.

Important Notice: This article is purely informational and doesn’t offer trading or financial advice. Its content is not intended to be investment advice. We do not guarantee the validity of the information, especially when it pertains to third-party references or hyperlinks.

 

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