China is as chilly towards Bitcoin as ever, but underground markets remain
Nothing has recently changed in China's attitudes to Bitcoin, and trading is still done on the down-low.
China's attitudes towards cryptocurrency have consistently run cold. As such, the news that the People's Bank of China has apparently declared Bitcoin legal is making big, bullish waves. Unfortunately it's not quite that simple.
The news originates from an article in the Beijing News which quotes Xiao Wei, a senior lawyer from the Bank of China Law Research Association, who said that in her opinion the ownership of Bitcoin should be legal, as should be the transfer of Bitcoin between individuals, based on her interpretation of current laws.
But there is no actual change in China's attitudes towards cryptocurrency.
The opinion expressed by Wei is not an official government declaration, it's just one person's legal opinion.
Secondly, Bitcoin has always been legal to own based on current laws, so even if you do ascribe a lot of weight to her words it's still correct to say absolutely nothing has changed between China and Bitcoin. On the plus side, it does signify that the legality of Bitcoin and cryptocurrency is still an evolving space in China.
As Jehan Chu, senior partner at Kenetic investment firm previously summarised China's policies towards cryptocurrency:
"I believe China simply wants to 'reboot' the crypto industry into one that they have oversight on, the same approach they took with the Internet."
It's clearly an ongoing process.
But as the original article from the Beijing News details, there's still a large underground crypto scene in China, which migrated to WeChat and other platforms following the closure of China's local cryptocurrency exchanges. There are many WeChat groups for Bitcoin trading, it explains, where traders use code words and directly name their prices through the chat.
Above: buying 4.95 BTC at CNY35,870, 2.8 BTC at CNY35,900 and so on.
These kinds of chat rooms are just bulletin boards to put up your orders and prices, Beijing News explains. From there, buyers and sellers take the deal-making to private chat.
Funnily enough, even in this underground market the Beijing News reporter who joined the group still had to provide KYC information to the group owner. And much like anywhere else, this involved providing ID and photos.
But it was more of a trust exercise than an anti-money laundering obligation, the piece suggests. Trades are by necessity done manually and peer to peer. There's no smart contract escrow service or instant order matching involved, so knowing who you're dealing with, and who to look for if they steal your money, is more important than ever. It's clunky and inconvenient, but it's also hard for authorities to stamp out.
It sure is nice to have a legal and well-regulated cryptocurrency exchange industry.
Disclosure: The author holds BTC, BNB, ATOM, IOTA at the time of writing.