This weekly roundup of news from mainland China, Taiwan, and Hong Kong attempts to curate top industry news, including influential projects, changes in the regulatory landscape, and blockchain integrations in businesses.

This week, China is back to work after its weeklong National Day celebrations, an event always filled with flag waving, military parades and enthusiastic nationalism. This year’s version was reinforced by the recent homecoming of Huawei manager Meng Wanzhou after three years in prison in Canada, as well as heightened tensions in the cross-strait. State regulators have spent most of the past half year wiping out the mainland cryptocurrency industry, an issue that has given the Shanghai man many topics to discuss in this weekly column.

Limited access to markets

On Wednesday, Binance took a step towards compliance by announcing that it would Conclude P2P for RMB markets. According to the announcement on Binance’s website, the change should take place on December 31, 2021. Meanwhile, it will search for mainland China users and switch their accounts to a withdrawal-only mode. At the same time, users will only be able to withdraw, close positions and use other essential functions. Binance will notify relevant users 7 days before the account switch by email.

The closure of the RMB P2P markets makes holding crypto in China a little riskier

The news was not well received by the remaining retailers, who believe that less and less reliable exits are available without resorting to more drastic measures like offshore accounts. Binance has been one of the most popular P2P markets, largely due to the exchange’s reputation, liquidity, and Binance’s geographic distance from Beijing. Binance has always claimed that its website has been blocked in China and there is no exchange business presence here, so it has been exempt from mainland regulatory policy.

There’s no denying that a lack of P2P fiat options will make investing in crypto a lot less convenient for Chinese citizens living in mainland China. With central bank eCNY digital currency just around the corner, stricter fiat regulations could make it difficult to move large amounts of fiat in and out of the crypto markets. On the other hand, many people are less concerned because they know that OTC markets arise whenever the opportunity arises to offer a service that is in demand. Technology always develops where it is needed most.

Read between the lines

On paper, the move seems pretty serious, but there are still some gray areas that need to be explored. It is no secret that this year there were millions of Chinese users registered on top exchanges, and many of them were active traders and large-scale owners. Some of them are likely to be put off by recent government policies and foreign exchange regulations and reduce their exposure to the asset class. Others are actively managed in DeFi, as evidenced by the increasing trading volumes in the chain from China.

Other users will just wait, especially given the rapidly changing nature of national policies. It is common belief that exchanges that choose to self-regulate may not initially enforce this policy very strictly. This is aided by the lack of clarity on how to deal with Chinese users overseas. Users may be able to bypass the rules entirely by providing international proof of residence or alternate ID. The silver lining here is that any selling pressure caused by uncertainty or fear from Chinese investors will be dampened by a long transition period.

For a company operating entirely outside of China, it is very difficult for regulators to enforce guidelines, especially when the exchange claims to regulate itself by banning IPs and not accepting new Chinese registrations. This is the strategy that exchanges like OKEx and Gate.io seem to be pursuing as these two major platforms with Chinese roots have announced that they are already fully compliant, won’t accept Chinese users and therefore wouldn’t make any drastic changes.

Gate announced its policy without emphasizing the removal of existing Chinese users in the mainland. https://t.co/q3yYLMX0Wp

– Wu Blockchain (@WuBlockchain) October 13, 2021

A prominent social media influencer on Weibo wrote:

“The content of this announcement is a bit strange. I think the exchange will do a self-check and try to discover the remaining Chinese users on the platform, but in case the exchange announces after the self-check that there are no Chinese users, the exchange will just leave them there. ”

This post was later deleted on Weibo. Currently, all topics related to Binance and other exchanges are censored by social media apps like WeChat.

Waning effect

Perhaps the most surprising finding of all of this was the market’s indifference to the news. Earlier announcements of this magnitude had a very pronounced impact on the market price. On Wednesday, BTC price fell briefly after Binance’s announcement, before bouncing back to above $ 58,000 the next day.

This shows that the market is putting less emphasis on the impact of news from China and is instead focusing on narratives like the hoped-for upcoming ETF approvals in the US and the surprise of Vladimir Putin entry about cryptocurrencies. Investors can take comfort in the fact that the more growth and decentralization increases, the more diversified the market risk.

The right to enforce

On October 11th, the financial magazine Caijing published one story Discussion of the enforcement of the latest crackdown on cryptocurrencies. The main points were that the central bank’s recent announcements were merely guidance and that the actual judicial interpretation and enforcement had to be done by prosecutors in the judicial system. The article implied that judicial authorities are now investigating the legality of mining and cryptocurrency companies, and that it could cause trouble for rule breakers. Those who had currently managed to bypass the rules might not be over the moon.