DeFi (decentralized finance) is a booming industry that allows users to conduct financial transactions without the involvement of traditional intermediaries such as banks. Amid strict regulations and bans on cryptocurrencies in China, users of the country faced a number of obstacles to using DeFi platforms and services. Despite these restrictions, however, Chinese users still find ways to circumvent bans by continuing to engage in decentralized financial transactions. In this article, we explore how DeFi functions in China, what bypass methods the local community uses, and what risks exist in doing so.
1. China cryptocurrency bans: Context
The Chinese government has long pursued tough policies on cryptocurrencies, imposing bans on the exchange of cryptocurrencies for fiat money, the operation of cryptocurrency exchanges and even mining. In 2021, a complete ban on cryptocurrency mining was announced, which significantly reduced China's share of the global bitcoin hashraite.
In addition, since 2017, Chinese authorities have closed all major cryptocurrency exchanges, which has made it difficult for users to access traditional centralized cryptocurrency services. This has created significant barriers for Chinese investors and traders seeking to leverage cryptocurrencies and participate in DeFi.
However, despite strict regulation, interest in DeFi in China has not faded, and many users continue to look for ways to circumvent these bans.
2. Bypassing China's cryptocurrency bans: Methods and technology
Despite official restrictions, Chinese users are actively using several methods to continue participating in DeFi and cryptocurrency exchanges.
2.1 Using VPNs and Proxy Servers
One of the most popular methods of bypassing locks is the use of virtual private networks (VPNs). With VPN, Chinese users can hide their real IP address and connect to international cryptocurrency platforms and DeFi protocols that are blocked in China. VPN allows the user to access decentralized exchanges (DEXs) such as Uniswap, Sushiswap and others, as well as participate in cryptocurrency transactions that would otherwise not be available.
2.2 P2P Platforms and Decentralized Exchangers (DEX)
Chinese users often turn to P2P exchangers such as LocalBitcoins or LocalCryptos to exchange cryptocurrency without the involvement of centralized platforms. On such platforms, users can exchange cryptocurrencies directly, bypassing state control. These services allow participants to conduct transactions in anonymous mode, which is an important factor for Chinese traders who want to hide their financial activity.
In addition, the Chinese actively use decentralized exchangers (DEXs) such as Uniswap and PancakeSwap to trade cryptocurrencies. These platforms allow users to exchange tokens directly through smart contracts without intermediaries, which reduces dependence on centralized services and facilitates access to DeFi protocols.
2.3 Use of stablecoins
Chinese users often use stablecoins such as USDT (Tether), USDC and DAI to circumvent bans on fiat currencies. These tokens are supported by real currencies and provide a stable price, which avoids fluctuations in the cryptocurrency market. Stablecoins are actively used in DeFi protocols for trading, lending and providing liquidity, making them an important tool for Chinese users.
2.4 Decentralized Wallets and Apps
Chinese users also actively use decentralized wallets such as Metamask to store and manage cryptocurrencies. These wallets allow users to connect to various DeFi protocols and smart contracts directly without using centralized exchanges. Metamask and other wallets provide security and anonymity, allowing users to maintain control over their funds.
3. Risks and problems in circumventing bans
Although Chinese users can use various methods to bypass bans and access DeFi, this is due to a number of risks and problems:
3.1 Legal risks
The use of DeFi in China can lead to legal consequences. Despite the activity of Chinese traders in decentralized applications, government agencies continue to harshly pursue any attempts to bypass locks. Users using VPN or P2P platforms to trade cryptocurrencies could face legal consequences, including fines or criminal prosecution.
3.2 Safety risks
Decentralized platforms, while offering a high level of anonymity, can be vulnerable to hacking and fraud. Lack of centralized control can create opportunities for attackers who can steal user funds. In addition, if users do not take proper security measures, such as protecting private keys, their funds may be lost.
3.3 Cryptocurrency Volatility
The DeFi protocols that Chinese users work with are often associated with high risks due to the volatility of cryptocurrency assets. The token rate can fluctuate wildly, resulting in significant losses for investors, especially those with no experience with cryptocurrencies.
4. DeFi outlook in China
Despite the current restrictions, DeFi's future in China looks promising. With the constant development of blockchain technologies and digital currencies, China can gradually integrate DeFi into its financial system using solutions such as the digital yuan (e-CNY). In the long term, a more flexible policy on decentralized finance and smart contracts is possible.
4.1 Digital Yuan Development
The digital yuan (e-CNY) could become an important element of the Chinese financial system, providing safer and more controlled mechanisms for using DeFi. China is actively developing its digital currency, and in the future this could create new opportunities for DeFi to integrate into the traditional financial system.
4.2 Strengthening international cooperation
China may begin to soften its position on DeFi in order to maintain international cooperation in the field of cryptocurrencies and blockchain technologies. This can lead to a more open and flexible approach to decentralized financial services.
5. Conclusion
DeFi in China continues to evolve despite strict bans and regulation. Chinese users are actively using bypass methods such as VPNs, P2P platforms and decentralized wallets to continue to work with cryptocurrencies and participate in DeFi. However, this involves risks, including legal and security. In the future, with the development of the digital yuan and possible legislative changes, DeFi could become an important part of the Chinese financial system.
1. China cryptocurrency bans: Context
The Chinese government has long pursued tough policies on cryptocurrencies, imposing bans on the exchange of cryptocurrencies for fiat money, the operation of cryptocurrency exchanges and even mining. In 2021, a complete ban on cryptocurrency mining was announced, which significantly reduced China's share of the global bitcoin hashraite.
In addition, since 2017, Chinese authorities have closed all major cryptocurrency exchanges, which has made it difficult for users to access traditional centralized cryptocurrency services. This has created significant barriers for Chinese investors and traders seeking to leverage cryptocurrencies and participate in DeFi.
However, despite strict regulation, interest in DeFi in China has not faded, and many users continue to look for ways to circumvent these bans.
2. Bypassing China's cryptocurrency bans: Methods and technology
Despite official restrictions, Chinese users are actively using several methods to continue participating in DeFi and cryptocurrency exchanges.
2.1 Using VPNs and Proxy Servers
One of the most popular methods of bypassing locks is the use of virtual private networks (VPNs). With VPN, Chinese users can hide their real IP address and connect to international cryptocurrency platforms and DeFi protocols that are blocked in China. VPN allows the user to access decentralized exchanges (DEXs) such as Uniswap, Sushiswap and others, as well as participate in cryptocurrency transactions that would otherwise not be available.
2.2 P2P Platforms and Decentralized Exchangers (DEX)
Chinese users often turn to P2P exchangers such as LocalBitcoins or LocalCryptos to exchange cryptocurrency without the involvement of centralized platforms. On such platforms, users can exchange cryptocurrencies directly, bypassing state control. These services allow participants to conduct transactions in anonymous mode, which is an important factor for Chinese traders who want to hide their financial activity.
In addition, the Chinese actively use decentralized exchangers (DEXs) such as Uniswap and PancakeSwap to trade cryptocurrencies. These platforms allow users to exchange tokens directly through smart contracts without intermediaries, which reduces dependence on centralized services and facilitates access to DeFi protocols.
2.3 Use of stablecoins
Chinese users often use stablecoins such as USDT (Tether), USDC and DAI to circumvent bans on fiat currencies. These tokens are supported by real currencies and provide a stable price, which avoids fluctuations in the cryptocurrency market. Stablecoins are actively used in DeFi protocols for trading, lending and providing liquidity, making them an important tool for Chinese users.
2.4 Decentralized Wallets and Apps
Chinese users also actively use decentralized wallets such as Metamask to store and manage cryptocurrencies. These wallets allow users to connect to various DeFi protocols and smart contracts directly without using centralized exchanges. Metamask and other wallets provide security and anonymity, allowing users to maintain control over their funds.
3. Risks and problems in circumventing bans
Although Chinese users can use various methods to bypass bans and access DeFi, this is due to a number of risks and problems:
3.1 Legal risks
The use of DeFi in China can lead to legal consequences. Despite the activity of Chinese traders in decentralized applications, government agencies continue to harshly pursue any attempts to bypass locks. Users using VPN or P2P platforms to trade cryptocurrencies could face legal consequences, including fines or criminal prosecution.
3.2 Safety risks
Decentralized platforms, while offering a high level of anonymity, can be vulnerable to hacking and fraud. Lack of centralized control can create opportunities for attackers who can steal user funds. In addition, if users do not take proper security measures, such as protecting private keys, their funds may be lost.
3.3 Cryptocurrency Volatility
The DeFi protocols that Chinese users work with are often associated with high risks due to the volatility of cryptocurrency assets. The token rate can fluctuate wildly, resulting in significant losses for investors, especially those with no experience with cryptocurrencies.
4. DeFi outlook in China
Despite the current restrictions, DeFi's future in China looks promising. With the constant development of blockchain technologies and digital currencies, China can gradually integrate DeFi into its financial system using solutions such as the digital yuan (e-CNY). In the long term, a more flexible policy on decentralized finance and smart contracts is possible.
4.1 Digital Yuan Development
The digital yuan (e-CNY) could become an important element of the Chinese financial system, providing safer and more controlled mechanisms for using DeFi. China is actively developing its digital currency, and in the future this could create new opportunities for DeFi to integrate into the traditional financial system.
4.2 Strengthening international cooperation
China may begin to soften its position on DeFi in order to maintain international cooperation in the field of cryptocurrencies and blockchain technologies. This can lead to a more open and flexible approach to decentralized financial services.
5. Conclusion
DeFi in China continues to evolve despite strict bans and regulation. Chinese users are actively using bypass methods such as VPNs, P2P platforms and decentralized wallets to continue to work with cryptocurrencies and participate in DeFi. However, this involves risks, including legal and security. In the future, with the development of the digital yuan and possible legislative changes, DeFi could become an important part of the Chinese financial system.