Bybit Enables Mainland Chinese Users via VPN, Excludes Yuan Transactions

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As a seasoned crypto investor with a knack for navigating the complexities of global regulations, I find myself intrigued by Bybit’s strategic maneuvers. Having faced similar challenges in my own journey, I understand the delicate dance between user accessibility and regulatory compliance.

This action occurs under China’s tight restrictions on cryptocurrencies, which forbid business-related crypto activities and transactions involving the yuan.

During a meeting on December 3, Bybit’s co-founder and CEO, Ben Zhou, revealed that this year, the platform started accepting registrations using Chinese national IDs and passports. He added that while Bybit restricts access from mainland China, users can circumvent this by connecting via Virtual Private Networks (VPNs), thus working around China’s ban on cryptocurrencies.

Zhou made it clear that the Chinese government strongly dislikes crypto because it allows for money to be moved out of the country easily. As a result, they have decided not to cross this particular boundary, meaning the platform won’t handle Yuan transactions. However, they are allowing VPN access, which is intended to accommodate the Chinese community living abroad, while still adhering to the restrictions set by Beijing’s policies.

Limited Uptake Among Mainland Users

Despite allowing VPN usage, Bybit has seen limited user expansion from mainland China, with Zhou attributing this to their stringent ban on yuan trading. This restriction appears to be a major obstacle for prospective users.

Bybit asserts it prioritized global expansion, growing its user base from around 20 million in 2022 to approximately 60 million this year. Yet, doubts persist regarding their platform’s reliance on derivatives trading, a practice that poses substantial risks for individual investors. Additionally, concerns have been raised about their expansion strategies, including taking advantage of the gap left by FTX’s downfall, leading to questions about the longevity and ethical nature of their business tactics.

Bybit’s strategy underscores the challenges of conducting business in nations with stringent cryptocurrency regulations. Remarkably, despite China’s complete prohibition on cryptocurrency trading and mining, mainland Chinese users find ways to participate in international crypto markets through unauthorized avenues like peer-to-peer platforms and Virtual Private Networks (VPNs).

Bybit employs a strategy to balance user demand and minimize the risk of regulatory infringements. Yet, enabling VPN connections might subject users to increased security hazards – an issue that has prompted platforms such as Coinbase to adopt tighter policies regarding VPN use.

Hong Kong Licensing Challenges

Beyond dealing with China’s regulations, Bybit has encountered challenges in securing regulatory approval in Hong Kong. Originally, the exchange aimed to get a license under Hong Kong’s newly established cryptocurrency system, but they withdrew their application in May due to compliance issues. Zhou disclosed that this decision was made because of a potential conflict of interest involving Bybit’s compliance officer, who also held a position with a previous employer.

In early 2025, the company intends to resubmit its license application, stating that they’ll tackle the outlined problems. Yet, there’s uncertainty if these actions are genuinely aimed at complying with regulations or simply enhancing their public image in a regulatory sphere where their reputation has previously been examined closely.

In the world of cryptocurrencies, Bybit’s approach balances two crucial aspects: making the platform easy for users to access and ensuring compliance with regulations. While the VPN option allows mainland Chinese users to bypass restrictions, it stirs debate about the potential long-term implications of going against local laws.

In light of China’s increasing control over capital outflows and cryptocurrency transactions, I anticipate that Bybit’s strategies will face heightened scrutiny in the upcoming period, given my role as an analyst.

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2024-12-06 13:08