Despite the ban by the Chinese authorities on the use of digital currencies in the country, many traders are circumventing this ban by using decentralized crypto exchanges, writes the Financial Times.

While many law-abiding Chinese are closing their digital wallets following the ban on cryptocurrency investments, a number of traders are determined to continue what they started. One such trader, who wished to remain anonymous, said he received a notice from his cryptocurrency exchange that his account would be closed by the end of the year. However, he also spoke about his intention to open an account on a decentralized exchange.

Back in May, Chinese authorities demanded a halt to Bitcoin mining, and at the same time, decentralized finance (or DeFi) was developed, which allows users to trade with each other without any intermediary, such as a bank or broker, and makes it difficult to block accounts.

Many resilient traders continue to trade cryptocurrencies as they did before, simply using foreign bank accounts.

“How can the authorities stop me when this entire industry has evolved to escape central control?” — another anonymous trader rightly asks.

Let us recall that the most stringent measures against cryptocurrencies were introduced in September, but the first ban on cryptocurrency exchanges was introduced in China in 2017. Bitcoin trading activity peaked in November 2019 with China’s share of 15%, falling to 5% in June 2021.

In the year to June this year, mainland China recorded $256 billion in cryptocurrency transactions, the highest in Asia, and roughly half of that—49%—was conducted through DeFi platforms, according to Chainalysis. One of the largest DeFi exchanges today is Uniswap. It is the second largest exchange in East Asia in terms of transaction volume.

The secret of these decentralized exchanges is that they do not have the same strict know-your-customer obligations as more closely regulated traditional exchanges. And even if the use of DeFi is banned in China, such transactions are very difficult to track in practice due to the anonymity that the exchange provides to its users.

So far, governments in many countries around the world are just thinking about how to regulate this space, for example, by requiring some form of user identification. The USA is no exception in this sense. Gary Gensler, chairman of the US Securities and Exchange Commission (SEC), has warned that regulators are seeking more power to regulate DeFi platforms.

DeFIs primarily attract large institutional investors in countries such as the US, China, Vietnam and the UK, who have large cryptocurrency wallets and can play by their own rules. Such an exchange platform attracts owners of large crypto assets because it allows them to receive income from their digital currencies.

The Chinese face a different kind of problem here: not all of them have accounts abroad where they could transfer profits from DeFi protocols, since transferring them to accounts in Chinese banks is no longer possible. For wealthy Chinese, this is not a problem if they can transfer cryptocurrencies to their overseas bank accounts and bypass the state’s capital controls.

On one of the unofficial crypto blogs 0 51 Bitcoin Forum, which appeared after Chinese social networking sites began censoring content related to cryptocurrencies, Chinese investors are asked to register an overseas company and apply for opening a trading account for the company. Also on the site you can find a list of financial institutions in the UK and US that allow individuals from China to open bank accounts to transfer profits from cryptocurrency investments into fiat currency.