Chinese investors are heading to the ‘crypto-wild west.’ Following Beijing’s ban on bitcoin investment, decentralized finance is gaining traction in China.
As part of China’s anti-cryptocurrency effort, bitcoin mining activities were shut down in May. This has coincided with the emergence of decentralized finance, or DeFi. Which allows users to trade directly with one another without the need for an intermediary such as a bank or broker. By Chinese investors making it more difficult to stop.
However, in September, there was a particularly harsh assault on cryptocurrencies as a whole. When crypto exchanges were made illegal in 2017, Chinese customers began using DeFi instead. In November 2019, China’s percentage of global bitcoin transactions reached 15%; by June 2021, it had dropped to 5%. Chainalysis, a company that conducts research, says this.
In the 12 months leading up to June, mainland China was linked to $256 billion in cryptocurrency activity. Which is the largest in Asia, with DeFi platforms accounting for 49% of the total. According to Chainalysis, Uniswap, one of the top Chinese investors DeFi exchanges. And now the second largest exchange in East Asia by transaction volume.
Deterring New Blood from Entering the Crypto Markets
While the newest limitations are discouraging newcomers from entering the crypto markets, experts claim. Some existing bitcoin holders are resorting to DeFi to keep trading. DeFi protocols are not subject to the same “know your customer” requirements as more strictly regulated traditional exchanges.
According to Chainalysis, nations with historically big institutional investors and huge crypto wallets. Countries such as the United States, China, Vietnam, and the United Kingdom played an outsized role in DeFi. DeFi appeals to large crypto asset owners since it allows them to profit from their holdings. DeFi protocols allow users to lend their crypto to build liquidity pools for peer-to-peer lending. Investors receive a portion of the transaction fee or token payouts in exchange.
However, industry insiders warn that stronger DeFi legislation is likely to emerge in the United States. Which might include KYC requirements that make it more difficult for Chinese users to open new accounts including the internet of five things.
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