- Mainland China recorded more than US$220 billion in total transactions between June 2021 and July 2022 to remain East Asia’s top cryptocurrency market.
- Chinese special administrative regions Hong Kong and Macau ranked No 4 and 5, respectively, behind South Korea and Japan, a Chainalysis report said.
Mainland China remains East Asia’s largest cryptocurrency market in terms of transaction turnover and ranked fourth worldwide, according to a new report, despite Beijing’s crackdown on the trading and mining of these digital assets.
Huge transaction
The country recorded more than US$220 billion in total transactions between June 2021 and July 2022, surpassing those of South Korea and Japan in the same period, according to the latest report from American blockchain research firm Chainalysis.
“Chinese traders have long used VPNs [virtual private networks] to circumvent the Great Firewall,” said Zennon Kapron, founder of fintech consultancy Kapronasia. “Some bitcoin mining certainly has continued, although on a smaller scale than before.”
Largest cryptocurrency market
Although China started phasing out cryptocurrency trading in 2013 and has banned mining for digital tokens since May 2021, these actions prompted many to skirt regulations by moving their activities underground.
Chinese special administrative regions Hong Kong and Macau ranked as East Asia’s fifth- and seventh-largest markets in terms of cryptocurrency transactions, according to the Chainalysis report.
Total mainland China transactions, however, decreased 31 per cent from the same period a year ago, dragging down East Asia’s overall year-on-year transaction growth to 4 per cent – the slowest worldwide.
“The biggest reason for this is likely the decline in cryptocurrency activity in China,” the report said.
Clamp down for stability
The latest cryptocurrency transaction data on mainland China reinforces Chainalysis’ suggestion in an earlier report that Beijing’s ban on all trading has either been ineffective or loosely enforced.
Released in September, Chainalysis’ 2022 Global Crypto Adoption Index showed that mainland China ranked 10th in cryptocurrency activities, up from 13th place last year, but down from fourth place in 2020.
“China has done quite a bit to clamp down on crypto usage in the country and there aren’t too many levers left for them to pull,” fintech consultant Kapron said. “It’s reasonable to assume that what we’re now seeing in China will either be the normal involvement in crypto to expect in the future, or the lowest point that we could expect to see in terms of uptake.”
Yip Ki-nang, manager at Hong Kong-based blockchain advisory firm QuantBlock, said in September that crypto and blockchain proponents in China are using campaigns related to the metaverse and non-fungible tokens to disguise their activities.
Bitcoin Hub
Mainland China has also re-emerged as a major bitcoin mining hub, according to data released in May by the Cambridge Centre for Alternative Finance (CCAF).
The country made up 20 per cent of bitcoin’s total hash rate – a measure of the network’s processing power for verifying transactions and mining new cryptocurrency tokens – from September last year to January, according to the CCAF’s Cambridge Bitcoin Electricity Consumption Index, which is based on aggregated geolocational data reported by partner mining pools.
That uptick in activity came after previous data suggested that China’s total hash rate dropped to zero in July 2021, following the implementation of a sweeping ban on cryptocurrency mining in May the same year.
Still, Beijing has not let up on initiatives to eliminate cryptocurrency speculation in the country.
Internet regulator the Cyberspace Administration of China in August ordered social media platforms on the mainland to terminate 12,000 crypto-related accounts.
Heading to zero
Prices of bitcoin, the world’s largest cryptocurrency in terms of trading volume, have fallen below US$20,000 after reaching a peak of nearly US$69,000 last November.
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Source: South China Morning Post
