Decentralised finance is taking off in China after Beijing banned investing in cryptocurrency. China’s campaign against cryptocurrencies led to the authorities shutting down bitcoin mining operations in May. That has coincided with the rise of decentralised finance or DeFi, which allows users to trade with each other without any intermediary, such as a bank or broker, and makes it harder to block. While the most severe enforcement against cryptocurrencies came in September, China first banned crypto exchanges in 2017 and Chinese users have been gradually moving towards DeFi. According to Chainalysis, a research firm, China’s share of global bitcoin transactions peaked in November 2019 at 15 per cent, and had fallen to 5 per cent in June 2021. In the 12 months to June, mainland China was associated with $256bn of cryptocurrency activity — the highest in Asia — and 49 per cent of the total was traded through DeFi platforms. Uniswap, one of the leading DeFi exchanges, is now the second biggest exchange in East Asia by transaction volume, said Chainalysis. While the latest restrictions are deterring new blood from entering the crypto markets, experts say that some existing cryptocurrency holders are turning to DeFi in order to continue to trade. DeFi protocols do not have the same “know your customer” obligations as the more tightly regulated conventional exchanges. Weekly newsletter For the latest news and views on fintech from the FT’s network of correspondents around the world, sign up to our weekly newsletter #fintechFT Sign up here with one click Chainalysis found that countries with historically large institutional investors armed with large crypto wallets — including the US, China, Vietnam and the UK — played an outsized role in DeFi. Large crypto asset owners are drawn to DeFi because it allows them to earn revenue from their coins. Users lend their crypto to DeFi protocols to provide liquidity pools for peer-to-peer lending to occur. In return, investors receive part of the transaction fee or token rewards. But industry insiders warn that tighter regulation on DeFi is likely to come in the US, which could introduce KYC obligations that make it harder for Chinese users to register new accounts.