TECH

The resurgence of an underground market challenging the Chinese communist government

Four years after a historic ban, an activity that many believed to be extinct has resurfaced. The state is tightening its grip, creating new control fronts, and hardening its rhetoric. Yet, the phenomenon persists in reappearing through paths that defy any system.

In 2021, China decreed a complete end to cryptocurrency-related activities. The decision seemed definitive: trading prohibited, mining deactivated, and platforms shut down. The objective was clear—to protect the financial system, contain capital flight, and prevent a parallel economy from consolidating outside of state control. But, four years later, unexpected signs are forcing the government to reinforce its offensive once again.

Faced with the recent growth of informal operations, the People's Bank of China convened a high-level meeting with judicial authorities, financial regulators, and technology agencies. All are part of a new inter-institutional coordination model focused on supervising digital activities considered risky.

The legal framework remains the same as in 2021, when cryptocurrencies were classified as "illegal financial activity." Exchanges were shut down, stablecoins were treated as a threat, and any type of intermediation was banned. What has changed now is the degree of urgency. According to the central bank itself, clandestine activity has once again grown in sufficient volume to trigger alert systems.

Authorities have reinforced that digital assets do not have legal tender status in the country and that the anonymity of transactions increases the risks of fraud, money laundering, and capital flight.

Mining is back on the radar — and reignites the maximum alert... The most sensitive data in this new moment is not so much in illegal trade, but in mining. Even though it has been prohibited for four years, the activity has reappeared in international measurements. The computing power originating in Chinese territory has grown slowly, indicating that old structures may have migrated to areas less visible from oversight.

Mining does not depend on direct sales, but it generates Bitcoin income that can circulate through routes that are difficult to trace. This point is particularly critical for the government: digital financial flows crossing borders without going through banks or traditional control systems.

This contradiction — formal prohibition and real activity on the rise — is the main reason for the new regulatory tightening.

A model that does not allow for flexibility...The government has made it clear that there is no sign of openness. The position remains aligned with the vision of financial stability advocated by the Chinese leadership, which sees cryptocurrencies as a structural threat to the control of currency and monetary policy.

Even so, the demand for digital assets persists, and mining has demonstrated the ability to survive even after massive shutdowns in 2021. This is a direct clash between a model of absolute control and a technology designed precisely to escape that control.

China is once again facing an adversary that never completely disappeared. The state is increasing surveillance, tightening oversight, and trying to close the loopholes that allowed the activity to return. But the very decentralized functioning of the crypto ecosystem continues to generate more questions than answers.

The big question now is whether the new offensive will be enough to contain this resurgence — or whether, once again, the system will find alternative ways to survive regulatory pressure.

More crackdown...The People's Bank of China (PBoC) emphasized that it will intensify its crackdown on cryptocurrency trading and speculation.

In a statement, the Chinese central bank reiterates that cryptocurrencies do not have "legal status equivalent to fiat currency" and that they are not legal tender, which is why "they should not and cannot be used as currency in market circulation."

The statement classifies activities linked to crypto assets as "illegal financial activities" and warns that, recently, speculation with crypto assets has started to grow again, bringing new scenarios and challenges to risk control.

The PBoC highlighted specific concerns about stablecoins, cryptocurrencies designed to maintain stable value, usually pegged to official currencies such as the dollar, stating that they "do not effectively meet the requirements for customer identification and money laundering prevention" and can be used in financial fraud schemes and irregular transfers of funds across borders.

The bank concluded by urging state bodies to maintain a prohibitive policy on cryptocurrencies, deepen coordination, strengthen monitoring, and share information to preserve economic and financial stability.

by Aleksandra Lima dos Santos