Chinese Traders Use Tether & VPN To Bypass Crypto Trading Ban
The South China Morning Post (SCMP) has reported that Chinese traders are employing virtual private networks (VPNs) to bypass the cryptocurrency ban enforced by the Chinese government.
With a report from Beijing-affiliated Shanghai Securities Times as reference, the SCMP has pointed out that traders are using the dollar pegged stable coin Tether (USDT) to enter and exit cryptocurrency markets.
Using a trading platform registered outside the China government jurisdiction, two traders can exchange fiat to crypto and vice-versa using a VPN. The exchange in this case acts as an intermediate.
The media outlet reports as follows:
“[T]wo individuals who have both completed a ‘know-your-customer’ procedure with an exchange would swap ‘fiat’ currencies […] to tether. The exchange plays the role of an overseer of such trades, and stands ready to adjudicate in cases of failed trades, or transactions that are not honoured.”
The implementation of blanket ban was carried out with more aggression last month by a Beijing district, which resorted to blocking more than 120 websites which acted as a bridge between the users and cryptocurrency exchanges operating abroad.
Regarding the ban, the Hong Kong and Taiwan exchange TideBit CEO Terence Tsang told SCMP, that the ban is “targeted at a batch of smaller exchanges that had claimed to be foreign entities, but are in fact operating in China claiming they have outsourced their operations to a Chinese company.”
The news also points out that there is no efficient process to block VPNs at this point in time. This allows smart traders to continue accessing banned online information and services.