DeFi: China’s Next Enemy

Written By: Kenichi Yamaguchi | June 17 2021

The violent collapse of Bitcoin in May was attributed to China’s continued crackdown on cryptocurrencies, but the reality is that the fundamentals have not changed between 2017 and today. Chinese authorities have recently adjusted their national policies on cryptocurrencies, but Bitcoin and other digital assets have been banned in China for a long time. Regulatory agencies such as the China Securities Regulatory Commission issued guidelines as early as 2014. 

 In a recent report, three industry self-regulatory organizations, including the China Internet Finance Association, the China Banking Association, and the Payment and China Compensation, reiterated that they fully comply with the previous People’s Bank of China cryptocurrency laws and regulations.

China blocks cryptocurrency Weibo accounts in 'judgment day' for bitcoin |  China | The Guardian

(Source: The Guardian)

The report stated: “The recent surge and decline in virtual currency prices have prompted a rebound in speculative virtual currency trading activities.” “It has seriously damaged people’s investment security and disrupted the normal economic and financial order.” The report stated that three industry organizations and Its members are prohibited from engaging in encryption-related businesses or providing services to industry companies. “Financial and payment institutions shall not provide their customers with virtual currency-related services or directly and indirectly provide their customers with cryptocurrency-related services, including cryptocurrency trading, custody, loans and settlement; accept virtual currency as payment Tools; exchange virtual currencies with the renminbi,” the statement read. The statement also reminded readers that “virtual currency has no actual value support, and its price can be easily manipulated.” 

It is also important to remember that most cryptocurrency transactions in China are conducted through individual-to-person over-the-counter markets. Owning digital assets such as Bitcoin is not illegal in China; in fact, the court has reiterated its support for treating them as virtual assets under Chinese law, rather than currency or financial products that the banking industry can interact with. For example, Binance operates a P2P OTC exchange for the Chinese market, which has many trading pairs named Tether. Many exchanges, such as OKEx, are operated by Chinese and target the Chinese market, but fly a foreign flag of convenience: OKEx provides addresses in Malaysia, but has a company registered in Malta. At the same time, blockchain technology is still China’s national research focus, and has been integrated into different technical verticals, from supply chains to courts.

Since the crash this morning, the price of Bitcoin has rebounded and is currently about $37,800.


Forkast.News. “DeFi with Chinese Characteristics? How China May Centralize Crypto Finance.” Forkast, 30 Sept. 2020,

“How the DeFi Craze Made Its Way to China.” Yahoo!, Yahoo!,

Pan, David. “How the DeFi Craze Made Its Way to China.” CoinDesk, CoinDesk, 16 Oct. 2020,

Redman, Jamie. “After Banning ICOs China’s Defi Ecosystem Grows Exponential This Year – Finance Bitcoin News.” Bitcoin News, 5 Oct. 2020,