Bybit Allows Mainland Chinese Users via VPN but Bars Yuan Trading

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December 5, 2024

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Dubai-based cryptocurrency exchange Bybit has taken a cautious but bold step in accommodating mainland Chinese users, allowing them to trade on its platform through virtual private networks (VPNs).

However, the exchange firmly excludes the Chinese yuan from its trading services, aligning its operations with China’s strict regulations on capital outflow.

According to a South China Morning Post report, Ben Zhou, co-founder and CEO of Bybit, announced on December 3 that the exchange began permitting signups using Chinese national IDs and passports earlier this year, catering to the “overseas Chinese community.”

Zhou clarified that this also enables mainland users to bypass the country’s crypto ban using VPNs, though the exchange blocks direct access via mainland IP addresses.

While this move reflects user demand and the company’s assessment of “acceptable risks,” Bybit has seen limited new user growth from mainland China due to its prohibition of yuan trading.

How Will Chinese Government React To VPN Usage?

According to the report, this decision is a delicate balance between meeting user demand and adhering to regulatory boundaries.

Zhou explained that the Chinese government’s primary concern with cryptocurrencies lies in their potential to facilitate capital outflows, making yuan transactions a regulatory “red line” for the platform.

“What the Chinese government dislikes the most about crypto is that it can facilitate capital outflow, so we won’t touch this red line.”

Ben Zhou

Despite the regulatory hurdles, Zhou emphasized that Bybit’s measures aim to provide access without crossing the Chinese government’s most sensitive restrictions.

Users residing in mainland China who wish to trade on Bybit can connect to the platform through a VPN, which masks their location by using an IP address from a different region.

However, Zhou acknowledged that the exchange has not seen a significant influx of users from mainland China, attributing this to the absence of yuan trading.

The company has instead focused on expanding its reach globally, with its user base tripling from 20 million in 2022 to nearly 60 million this year.

Conflicting Industry Preference: Is VPN Illegal?

Bybit’s approach reflects the broader challenges of operating in regions with complex crypto regulations.

Mainland China, once a global leader in cryptocurrency adoption, has banned commercial crypto activities since 2021.

Despite the ban, Chinese users continue to access crypto markets through unofficial channels, including peer-to-peer trading and VPNs.

Meanwhile, Bybit is also navigating regulatory landscapes beyond China.

After briefly seeking a license under Hong Kong’s regulatory framework earlier this year, the exchange withdrew its application in May due to compliance concerns involving a conflict of interest.

Zhou confirmed plans to reapply for the license in early 2025, citing the value of regulatory approval as a “confidence booster” for attracting talent and showcasing compliance, even if Hong Kong’s crypto market remains relatively small.

Bybit’s trajectory also highlights its emergence as a significant player in the global crypto space.

The exchange was ranked third-largest by daily trading volume. It has positioned itself ahead of Coinbase and trails only Binance.

The platform’s growth has been fueled by its focus on derivatives trading and swift response to market opportunities, such as filling the void left by FTX’s collapse.

Zhou’s pragmatic stance on VPN use contrasts with platforms like Coinbase, which have adopted stricter measures against VPN-related activities, citing security risks.

This recently escalated on social media between Coinbase and EthHub co-founder Eric Conner.

Bybit, however, sees VPNs as a necessary tool for mainland Chinese users to access the global crypto market without engaging in activities that could provoke regulatory scrutiny.