- Despite a strict ban on cryptocurrency trading in China, Binance recorded $90 billion in trading volume from Chinese users in May 2023, making China its largest market.
- Binance collaborates with Chinese authorities to curb illegal activities but faces increasing scrutiny from regulators worldwide due to opaque business practices.
In September 2021, the Chinese government officially banned cryptocurrency trading, aiming to tighten control over capital flows and prevent Chinese citizens from bypassing stringent foreign exchange regulations. The move was expected to shut down the country’s rapidly growing digital currency market and limit the ability of citizens to move money abroad. However, the ban has proven largely ineffective as Chinese traders continue to engage in high-volume crypto transactions, predominantly through Binance, the world’s leading cryptocurrency exchange.
According to a recent report by the Wall Street Journal, Binance recorded a staggering $90 billion in trading volume from China in May 2023 alone, accounting for 20% of its global trading volume. This data underscores the platform’s prominence in China, despite the regulatory crackdown. Binance’s resilience in the Chinese market can be attributed to its strategic navigation of the ban, directing Chinese users from domestic websites to its global platform, thus bypassing restrictions imposed by local authorities.
Binance’s Strategic Position in the Chinese Market
Following the 2021 ban, Binance initially saw a significant drop in its Chinese trading volume. By mid-2021, China’s contribution to Binance’s total trading volume had fallen from 24% to 17%. However, the market rebounded strongly the following year, reestablishing China as Binance’s most important market. This resurgence highlights the platform’s ability to adapt to regulatory challenges, leveraging technology and strategic positioning to maintain its dominance.
South Korea and Turkey follow China as Binance’s second and third largest markets, contributing 13% and nearly 10% of the platform’s total trading volume, respectively. In contrast, no other country accounts for more than 5% of Binance’s activity, highlighting China’s outsized influence on the exchange’s global operations.
Despite the official ban, Binance works closely with Chinese authorities, assisting in efforts to combat illegal activities among its 900,000 active Chinese users. However, experts believe that enforcement of the ban is lax, allowing China to remain the fourth largest market for cryptocurrency trading worldwide, despite the prohibition.
Navigating Regulatory Pressures
Binance’s complex relationship with China dates back to its founding in Shanghai in 2017 by Zhao Changpeng, a Chinese-born entrepreneur who later moved the company’s headquarters to Japan amid mounting regulatory pressure. However, Binance continued to maintain a significant operational presence in China, employing dozens of staff despite the official crackdown.
This ongoing engagement has sparked concern within Binance’s U.S. subsidiary, with fears that Chinese authorities could potentially access sensitive data belonging to American customers. These worries are compounded by broader regulatory challenges facing Binance globally, particularly in the United States, where the platform has come under intense scrutiny from regulators.
The U.S. Securities and Exchange Commission (SEC) and the Department of Justice are investigating Binance and its founder Zhao Changpeng over allegations of legal violations, including potential misuse of customer funds and operating without appropriate licenses. As a result, Binance’s market share in the U.S. has dwindled, and the company has faced increasing pressure to reduce its global workforce, recently cutting over 1,000 positions.
Binance’s ongoing success in China, despite these regulatory hurdles, underscores both the platform’s adaptability and the challenges that come with operating in a complex global regulatory environment. The platform’s ability to continue thriving in China—while simultaneously battling regulatory pressures worldwide—highlights the intricate dynamics of the global cryptocurrency landscape.
