Bybit Opens Doors to Mainland Chinese Users amid Regulatory Complexities

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As a researcher with a keen interest in the dynamic world of cryptocurrency, I find myself constantly intrigued by the complexities and nuances that define this burgeoning industry. The case of Bybit, a Dubai-based exchange, is a prime example of such complexity, especially when it comes to navigating regulatory landscapes like China’s.

Bybit, a cryptocurrency exchange located in Dubai, allows mainland Chinese users to trade on its platform using Virtual Private Networks (VPNs). However, it does not support transactions in the Chinese yuan as part of an approach aimed at complying with China’s strict digital asset regulations while catering to increasing user demand.

According to a recent article by South China Morning Post, Ben Zhou, co-founder and CEO of Bybit, declared on December 3 that the platform started enabling Chinese citizens to trade internationally earlier this year due to strong user demand. This move was made based on the company’s evaluation of risks they deemed acceptable. However, Bybit continues to uphold its policy against supporting yuan trading, as Zhou referred to it as a regulatory boundary they will not cross.

In simpler terms, Zhou mentioned that the Chinese government doesn’t like crypto because it allows for easy transfer of funds out of the country. This perspective has played a role in Bybit’s choice to restrict users from mainland China while accepting registration with Chinese IDs and passports. However, residents within mainland China have discovered a method to bypass these restrictions using Virtual Private Networks (VPNs).

It is interesting to note that despite this opening, the platform’s new user growth from mainland China has been low, a trend attributed to the platform’s prohibition on yuan transactions.

A Complicated Crypto Landscape in China

The careful growth of Bybit within mainland China underscores the intricate dynamics surrounding cryptocurrencies in that region. Previously a frontrunner in crypto adoption, China enforced a broad prohibition on cryptocurrency-related activities in 2021 due to apprehensions about capital flight and financial security.

Despite the restrictions, it appears that Chinese users are finding ways to engage with cryptocurrencies using unauthorized avenues such as peer-to-peer transactions and Virtual Private Networks (VPNs). In July, there was much talk about the possibility of lifting this ban, which sparked interest due to the potential far-reaching effects it could have on the global crypto market. Key figures in the industry like Mike Novogratz, CEO of Galaxy Digital, hinted at this possible move having a significant impact on the worldwide cryptocurrency market.

Bybit’s Regulatory Ambitions

Established in 2018, Bybit has climbed up the ranks to claim the third position among worldwide cryptocurrency exchanges by daily trading volume, with Binance leading and Coinbase trailing behind. The user base of this exchange has skyrocketed from 20 million in 2022 to close to 60 million in 2023, indicating its expanding global influence.

In different regions, Bybit has encountered regulatory difficulties. Initially applying for a license in Hong Kong in January, they subsequently withdrew their application in May due to a compliance problem concerning a potential conflict of interest with one of their compliance officers. It’s worth noting that regulators in Hong Kong disallow platforms from serving mainland China customers. However, despite these hurdles, Zhou remains hopeful about reapplying for the license as early as 2025, with plans to overhaul their compliance team first.

Obtaining a Hong Kong license would serve as an “assurance builder” for Bybit, according to Zhou. However, he noted that the size of Hong Kong’s cryptocurrency market is still relatively modest. He went on to say that the main advantage of the license lies in attracting skilled professionals and demonstrating adherence to regulatory standards.

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2024-12-04 18:58