high for many ordinary people, but you could buy a fraction
of a bitcoin for as little as one dollar. By mid-2013, Chinese
exchanges were moving more than $35 million in bitcoins
The speculative fervor threatened to get out of hand. Beijing was also worried about yuan leaving the country. China
caps yuan outflow at $50,000 per person per year. While it’s
not clear that large numbers of people were using Bitcoin to
evade Chinese capital controls, the potential was there. People
in China could buy bitcoins in yuan, sell them on an American
exchange, and then withdraw the sum in dollars. In late 2013
Chinese authorities struck back, banning financial services
companies from dealing with Bitcoin exchanges. People could
no longer withdraw yuan from their bank accounts to directly
buy bitcoins on Chinese exchanges.
It wasn’t long before Chinese people figured out how to
get around this obstacle. Instead of paying exchanges directly
from their bank accounts, they used cash to buy vouchers
that could then be traded on the exchanges. Alternatively,
purchasers could send money to the personal bank account of
someone who worked at an exchange.
The latest restrictions are more draconian, with cryptocurrency exchanges now shut down. But once again, work-arounds have emerged. Some people have turned to online
and o;ine peer-to-peer trading. People can also buy and sell
digital currencies on the encrypted messaging app Telegram,
which is blocked in China but can be accessed by virtual private networks (VPNs) that get around the Great Firewall.
People who already own coins can just go online and trade
them on an exchange that is based overseas. There was even
some trading on WeChat, China’s massively popular but
heavily monitored messaging app.
After all, China did not ban Bitcoin itself, nor did it
explicitly prohibit peer-to-peer trading. And importantly,
China hasn’t banned the mining of bitcoins, in which people have their computers race to solve di;cult mathematical problems in exchange for coin rewards. As of September,
more than two-thirds of bitcoins were made in China. Much
of the computer hardware used for mining is manufactured
there. Miners use a great deal of computing power, and some
Chinese computer clusters used for the process enjoy access
to relatively cheap electricity. The growth and dominance of
Chinese mining has led to fears among some that the country
has too much influence over the future development of blockchain technology.
A founder of a pool of miners, a person who goes by the
name of Discus Fish, says that China’s local governments
once encouraged mining, particularly in mountainous areas
that produce hydroelectric power. The mines were using
energy that would otherwise have gone to waste. Then in
September the political environment changed, and he feared
some local governments would no longer welcome mining.
But others in the mining community were unconcerned.
Zhao Qianjie, a vice president of BTCC, notes that the com-
pany’s mining pool was not influenced by the crackdown
on its Bitcoin exchange. And in China, if something is not
explicitly verboten, then it’s full speed ahead.
Getting around control
What is clear is that China has made it more inconvenient
for newcomers to enter the Bitcoin market. But maybe this
isn’t such a bad thing. At least so would argue James Gong,
a Shanghai-based cryptocurrency expert who founded ICOage, an online platform through which ventures could promote and raise money for their ICOs. Launched last January,
ICOage closed down in September. He says that most of the
ventures on his platform were not Chinese, and that the overseas projects were generally higher in quality than the Chinese
ones. “People who don’t understand blockchain or digital currency shouldn’t be participating in this market,” Gong says.
“The risks are too great. Raising the threshold for ordinary
people to trade digital currency is good for the industry as
a whole. Some Chinese people were blindly investing. They
would buy anything.”
Even now, Chinese people who want to trade cryptocur-
rency are likely to find a way. China is making trading di;cult
but not impossible. Beijing employs a similar strategy for cen-
soring the Internet. It’s possible to use a VPN to jump over the PAB