DeFi Platforms Rise After New Chinese Bans, Digital Yuan on Track to Launch

DeFi Platforms Rise After New Chinese Bans, Digital Yuan on Track to Launch

Source: Adobe Stock

An unexpected effect of the cryptocurrency ban in China: platforms for launching decentralized finance started to grow, including Binance Coin (BNB), Terra (LUNA), Polygon (MATIC).

On September 24, a memorandum was published according to which cryptocurrency transactions are prohibited in China, and citizens working on foreign cryptocurrency exchanges are subject to legal prosecution. Experts point out that DeFi projects benefit from this situation, as it is harder to track them. Funds have been flowing to the leading DeFi platforms and popular Uniswap (UNI) decentralized exchange (DEX), and their tokens are on the rise.

Ben Yorke, vice president of the Taiwan DEX WOO Network, notes that after the bans in mainland China, daily volumes of his exchange have reached record highs. The situation is the same on DEX dYdX (DYDX), the own tokens of decentralized exchanges are also growing. For example, DYDX has grown by almost 130%, from $12.05 on September 24 to $27.5 on September 30. Ben York states:

– The regulation is fragmenting liquidity away from market leaders and pushing it into DeFi and tier two exchanges … At the moment, DeFi seems like a proactive way to minimize custodial or platform risk.

Meanwhile, it became clear why the bans in China were tightened. The Celestial Empire is preparing to launch a full-scale digital yuan. Another pilot project has been launched in the Chinese city of Xi’an with a population of 5.7 million people, the administrative center of the Shanxi province. The digital yuan can now be used to pay electricity bills and some goods and services, including taxi rides. The full launch of the digital yuan is expected at the Winter Olympics in February 2022. The digital yuan whitepaper was published in July 2021.

Due to the high activity of big investors, the Ethereum network is overloaded again, that’s why fees have increased greatly. The community was shocked recently by the news that Bitfinex paid a $23 million fee for a $100K transaction. Experts assessed this situation as a failure. And players have become more attentive to solutions for scaling the Ethereum network.

Polygon (MATIC) is one of the most popular such second-level solutions. Polygon creates an “internet of blockchains” similar to other multi-chains like Polkadot (DOT), Cosmos (ATOM), Avalanche (AVAX), while maintaining the advantages of Ethereum, such as security and an open dynamic ecosystem. According to the PolygonScan service, which is close to EtherScan for functionality, the number of active addresses in the Polygon network is constantly growing, sometimes it even exceeds the number of active addresses in the Ethereum network. Over the past 3 months, active Polygon addresses have grown by 330%. But the price of MATIC did not rise. Perhaps the token will soar soon.

The growing investor interest in DeFi may also be caused by SEC Chairman’s tough statements about tightening cryptocurrency regulation. According to Gary Gensler, cryptocurrency investors are currently not protected from fraud, so “cryptocurrency trading and lending venues should become regulated.”