January 29, 20182min626

Why the Chinese Crypto trading Ban is Ineffective

When the Chinese government banned crypto-currency exchanges in September of last year the effect was fairly large, but also very short lived. So how did the Chinese crypto-enthusiasts get around the trading ban? Why is Chinese Crypto trading Ban ineffective?

In the aftermath of the Chinese crypto-trading ban, the largest Chinese crypto-currency exchanges underwent minor re-branding and moved to Honk Kong.

Due to the very pro-business policy in Hong Kong it was very easy for Chinese citizens to start a business with just $1,000 starting capital and open a Honk Kong based business bank account. This gave them the ability to transfer money to the now Hong Kong based exchanges and resume trading.

It wasn’t long before the relocated crypto-exchanges added support for two of the biggest Chinese on-line payments providers Alipay and WeChat Pay, which rendered the Chinese government’s ban essentially useless and opened the floodgates to Chinese investors.

Due to the limited supply the prices started to grow relative to other markets, even the very popular South Korean ones, creating some very lucrative arbitrage opportunities for well positioned traders.

It’s inevitable that governments will continue to increase regulation of the crypto-assets, but in fast evolving world fin-tech they are always going be playing catch-up.

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