“Chinese Traders Thrive Amidst Cryptocurrency Ban: How They Overcome Restrictions”


Despite strict measures against mining and digital currency transactions, Chinese crypto traders continue to thrive in the market. In 2020, China was a major player in the cryptocurrency market, accounting for over 75% of the global Bitcoin mining hashrate. However, the government’s crackdown on all cryptocurrencies changed the landscape. Despite this, recent developments suggest that regulations may be easing, as investors seek out promising new assets.

Chinese traders remain a significant force in Bitcoin trading, and their participation in the recent cryptocurrency sell-off was driven by market price fluctuations rather than new constraints imposed by Chinese regulators.

According to Chainalysis, between July 2022 and June 2023, the Chinese cryptocurrency market processed a whopping $86.4 billion in crypto transaction volume. The large retail transactions, ranging from $10,000 to $1 million, make up 3.6% of the total, nearly double the global average.

Experts at Chainalysis believe that recent events in Hong Kong have sparked speculation that the Chinese government may be warming up to cryptocurrencies, with Hong Kong potentially becoming a testing ground for these efforts.

Despite the ban on cryptocurrency trading in China since 2021, Reuters reports that losses in the Chinese stock market over the last three years have driven investors to turn to cryptocurrencies. Dylan Run, a financial executive in Shanghai, refers to Bitcoin as “a safe haven, like gold.” He began shifting some of his funds into cryptocurrencies in early 2023, noticing the downturn in China’s economy and stock market.

While officially banned, cryptocurrency trading remains accessible in China. Citizens continue to trade digital tokens like Bitcoin on platforms such as OKX and Binance or through over-the-counter methods. Another option is using foreign bank accounts to buy cryptocurrencies.

With the ban on cryptocurrency trading, Chinese investors have become more creative in managing their funds. Reuters reports that some investors have used bank cards from small rural banks to purchase cryptocurrencies through unofficial dealers, keeping transactions under 50,000 yuan ($6,978) to avoid drawing attention from authorities.

Traders have also found various ways to transfer cryptocurrencies, including cash or bank transfers. Cities like Chengdu and Yunnan have become hubs for these traders, offering a respite from the central government’s scrutiny, which is focused elsewhere. Chinese investors have also turned to social networks like WeChat and Telegram for cryptocurrency trading, bypassing the need for centralized exchanges by connecting with others in specialized groups.

In rural areas, where regulations are less strict, physical trading of digital assets is prevalent. Traders often meet in public places such as cafes or laundromats to exchange wallet addresses or conduct transactions in cash or through banks.

Hong Kong also offers savings opportunities for Chinese citizens. They are given an annual foreign currency purchase of $50,000, which some use to buy cryptocurrencies in the Hong Kong market.

As China’s $135.7 trillion real estate market continues to struggle, more citizens may turn to cryptocurrencies. The country’s property market ended 2023 with the steepest fall in new home prices in nearly nine years, despite government efforts to prop up a sector once a critical driver of the world’s second-largest economy. This has led to an increase in mainland investors entering the cryptocurrency market, according to an anonymous Hong Kong crypto exchange executive.

Not only retail investors but also Chinese brokers and other financial institutions have started entering the cryptocurrency market. The need for growth opportunities on the mainland has pushed them to explore the cryptocurrency business in Hong Kong.

Some users have bypassed geo-restrictions by saving their accounts on trading platforms and using virtual private networks (VPNs). In May 2023 alone, the turnover of Chinese traders on Binance reached $90 billion – approximately 20% of the total. According to CNBC, exchange employees advised users from China to evade KYC checks. Last year’s report also highlighted that some traders opened crypto accounts with fake documents, including citizenship.

The surge in Bitcoin and other cryptocurrencies in China comes from underperforming traditional Chinese investments. The crackdown on the real estate sector and the ongoing economic transition have made conventional investment avenues such as stocks and real estate less attractive. Cryptocurrencies are emerging as a viable alternative, offering stability and growth potential amid the turbulence of the Chinese economy. This strategic shift in response to a changing economic and regulatory environment is reflected in the rise of Chinese traders in cryptocurrency investment.

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