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Bitcoin Regulation and Bitcoin Tax in China
The secret to making money mining bitcoin is to reduce the energy costs. It is no accident then that 70-80 percent of all bitcoins is currently mined in China where energy is cheap. When bitcoin first started anyone could create bitcoins or ‘mine’ them on their home computer. As time marched on it became more complex and now requires large factories of banks of computers all busy working on the complex problems (algorithms – see bitcoin glossary) to solve to mine bitcoins. This takes a tremendous amount of energy and is therefore costly to maintain energy wise.
The Chinese governments clamped down firstly on exchanges and, with the recent clamping down on mining factories, has dealt a heavy blow to bitcoin and probably been responsibly in part for the drop in value over the recent weeks. Exchanges are now banned from trading or dealing in bitcoins as the government believed it was taking advantage of a loophole in the regulation regard transferring large sums of cash overseas and being used to transfer large sums of money out of China in violation of the 50,000 dollars year restriction and mining is to go the same way on the basis that the energy being used is being taken away from local industry.
So how does a person in China buy and or sell bitcoins? In fact the Chinese government has simply driven bitcoin into the black market and has not stopped bitcoin transactions at all. It is still possible to buy and sell bitcoin in China. The two main ways a person in China can buy and sell bitcoin is either by using P2P (person to person) or off shore exchanges.
With P2P Say you have someone you trust outside of China; you can transact bitcoin with them by prior arrangement. There are also sites or services such as LocalBitcoins.com and Paxful.com expressly built for this purpose. Of course a P2P bitcoin exchange takes longer and you do have to be wary of scammers so should do due diligence. It is noteworthy that when bitcoin trading was banned in China the volume of trading at LocaBitcoins.com and Paxful.com (another peer to peer network) increased enormously.
The other method is by opening an account with an off shore (to China) exchange (OSE) such as Bitfinex or Coinbase and transact or trade there. For example if you have bitcoin and live in China you can simply transfer your bitcoins to a wallet in your account in an off shore exchange. You then sell those bitcoins for currency. You can buy bitcoin at Coinbase.com using a credit card also although there would be a premium to pay and there are daily limits. So despite the bans imposed by the Chinese Government it is still possible to trade in bitcoins.
This is an area we will be updating as events unfold
This article is for information purposes only and is not to be construed as financial information for any purposes such as investment or speculation and it is the responsibility of the reader to perform proper due diligence before acting upon any of the information provided. We recommend that you consult with a licensed, qualified investment advisor before making any investment decisions.