Tether and VPN Rescue Chinese Crypto Traders to Circumvent The Bans
Since September 2017, the government of China intensely prohibited cryptocurrency by banning ICO and exchanges all over the mainland; leaving other territories like Hong Kong and Taiwan optimizing cryptocurrencies freely. However, cryptocurrency enthusiasts in China has not given up; they find alternatives and manage to still trade through virtual private network (VPN) and Tether (USDT).
Considering that VPN is legal in China, Chinese investors see it as a promising way out to disguise their location so they can make transactions without fear of getting caught. Tether is used as the intermediary by converting yuan to tether because of its stability.
Chinese traders often use “client to client” scheme which basically works like online shopping; two people need to complete a “know-your-customer” procedure with an exchange which plays a role as a supervisor, before substituting “fiat” currencies, or legal tender of a government, to tether. If there’s any disputes on the transaction, the exchange will be the judge to determine the solution. Finally, the “buyer” transfers the money through bank accounts or third-party online payment platforms to the “seller”; allowing the “buyer” to start trading crypto-to-crypto on any exchanges.
Other alternatives other than using VPN combined with tether are by trading in offshore markets, especially in Hong Kong, and by utilizing over-the-counter (OTC) platforms. Cryptocurrency traders who move their investment in Hong Kong set up shell companies to obtain bank accounts to trade on cryptocurrency exchanges. Some others use an app like LocalBitcoins which allows them to purchase using OTC (over-the-counter) scheme, which works similarly like a marketplace.
According to the founder of Hong Kong FinTech company Bitquant, Joseph Wang, tether is more appealing for some cryptocurrency traders because the performance is backed by USD, makes it less volatile than any other cryptocurrencies. On the other hand, its nature as a digital currency adds more benefit for traders to use it without paying extra money for transmission.
“USD are dollars that are held directly in a bank account. USDT are coins that issued by Tether which some exchanges will accept, but the money doesn’t go into the exchange’s bank account and to the exchange, it’s just another coin. Some exchanges prefer USDT because it’s not “real cash” you can send it from point A to point B without hitting money transmission laws.”
Influencers Respond, “I Think That Would be Huge!”
As the news of Chinese cryptocurrency enthusiasts struggle on bypassing the ban sparked, a wave of supports emerged from crypto influencers. Anthony Edward from Thinking Crypto Youtube channel posted a response video and expressed his hope on cryptocurrency in China. At the minute 15:35, Anthony said: “Imagine China getting involved in cryptocurrency officially where it opens up to the country, Guys. I think that would be huge. They would be another pillar; I believe in the market as far as volume; because right now South Korea, Japan, and so forth are big in crypto market and I can’t wait for China to get on board, and I think they will eventually. As we talked about (before), countries try to outdo each other; they are competing with each other. All of them are looking for ways to boost their economies. […] Once one country sets the precedence and the bar high, we’ll see the others follow because they don’t want to left behind.”
Another positive comment came from @CryptoLeee; by attaching a video of a little girl shopping with WeChat, @CryptoLeee was confident that China would dominate the world’s economy, especially with crypto. “China is gonna, if not already, dominate the whole f****** world. An economic super power. Paying with WeChat is daily routine like seen here. That’s why I’m so bullish on $VET and Chinese alts in general. #Crypto in China is coming. And the rest of the world wants a piece of it.”
Sentiment Viz also showed a consistent result with mostly green dots headed to the edge; reflecting how excited people were to crypto in China.
Figure 1: Sentiment Towards ‘Crypto in China’ Keyword
Data Source: Sentiment Viz.
USDT/CNY Market Cap Increases
According to CoinGecko, the USDT/CNY market cap in August 14 to September 13, 2018, showed a stable surge. For the last 30 days, the capitalization increased for more than 18% from CNY 16,331,946,872 to CNY 19,320,138,364; another concrete proof showing the importance of tether for Chinese traders right now.
Figure 2: Market Cap USDT/CNY 14 August 2018–13 September 2018
Data Source: CoinGecko.
 Lee, G. 2018. Cryptocurrency Traders in China Find Ways to Get Around State Regulators Despite Tighter Scrutiny. [https://www.scmp.com/business/companies/article/2163194/despite-tighter-scrutiny-crypto-trading-frenzy-proving-hard-douse]. Accessed September 12, 2018.
 Young, J. 2018. Crypto Trading in China Remains Active After Ban, Firms Offer Exchange Insurance. [https://news.8btc.com/crypto-trading-in-china-remains-active-after-ban-firms-offer-exchange-insurance]. Accessed September 12, 2018.
 Quora. 2017. What is the difference between USD and USDT in trading bitcoin? [https://www.quora.com/What-is-the-difference-between-USD-and-USDT-in-trading-bitcoin]. Accessed September 12, 2018.
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