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Crypto entrepreneur Justin Sun, who serves as an advisor to cryptocurrency exchange Huobi, allegedly has a novel plan to bypass Beijing’s trading restrictions and once again draw Chinese users, the Wall Street Journal reported. The scheme involves a digital citizenship program from Dominica, a small island nation in the Caribbean.
China’s Stance on Crypto
China imposed a blanket ban on all cryptocurrencies in 2021, including a ban on mining operations. China’s regulatory bodies also prohibited all crypto trading and transactions. This came as crypto exchanges in the country have been outlawed since 2017.
Anyone working for a Chinese tech firm associated with crypto can even face jail time. It is also illegal for residents to send crypto and for businesses and banks to accept coins.
Notably, Hong Kong has recently announced more crypto-friendly regulations as the city aims to again lure crypto businesses and become a global crypto hub. However, Beijing’s ban on digital assets continues to remain in place.
Justin Sun Aims to Sidestep China Ban
According to a recent report by the Wall Street Journal, Huobi boss Justin Sun has a new plan to bypass the China ban. The move comes as the exchange is seeking to attract Chinese users once again and boost revenue by tapping the country’s huge market for digital assets.
The scheme involves a digital citizenship program from Dominica. As reported, the Commonwealth of Dominica partnered with Huobi last year to issue Dominica’s national token, Dominica Coin (DMC), and its Digital Identity (DID).
At the time, the island nation said that holders of its digital identity can open a bank or financial account, apply for loans, register companies that provide digital services, claim digital currency airdrops, and use it for Know Your Customer (KYC) verification.
Sun plans to use the nation’s digital identity for KYC verification in this case. According to the WSJ report, new Huobi users who choose Chinese as their nationality while verifying their details will be prompted to apply for Dominican digital citizenship and use it for KYC purposes.
“People familiar with the program said Chinese users will be able to trade on Huobi’s platform if they register for Dominican digital citizenship,” the report said, sharing a screenshot that directs Chinese users to apply for Dominican digital citizenship.
A Huobi spokesperson said the company “uses KYC verification to prevent China users from doing such things.” However, two Chinese nationals in the country said they had used the Dominican digital identity to trade on the platform.
Ben Charoenwong, an assistant professor in finance at the National University of Singapore, also claimed that the Dominican digital citizenship program could help Chinese nationals bypass restrictions and trade cryptocurrencies. “It’s easier when you don’t show up as a Chinese citizen; you’re out of the Chinese financial system,” he said.
Binance Accused of Allowing Chinese Users to Trade on its Platform
Aside from Huobi, the world’s largest cryptocurrency exchange Binane has recently been scrutinized for allowing Chinese residents to trade crypto on its platform. According to a CNBC investigation, Binance employees assisted Chinese users in bypassing KYC and other security requirements.
The report claimed that Binance employees or Binance-trained volunteers known as “Angels” shared techniques with users that can be used to evade Binance’s KYC, residency, and verification systems. They also reportedly shared video guides with Chinese users about falsifying their country of residence to obtain Binance’s debit card.
In November last year, blockchain research firm Chainalysis revealed that Binance handled around $8 billion in crypto transactions with Iran since 2018 despite sanctions. Before this, Reuters had reported that Binance continued providing services to clients in Iran.
Do you think Huobi can turn China’s ban using Dominican digital citizenship? Let us know in the comments below.