Despite strict government regulations, China’s over-the-counter (OTC) cryptocurrency brokers are experiencing unprecedented growth. A new study by Chainalysis reveals that these brokers have attracted over $75 billion in inflows in just nine months, underscoring the enduring demand for alternative investments in the struggling Chinese economy.
The surge in OTC trading volumes comes amidst a backdrop of weak equity and property markets, making cryptocurrencies an increasingly attractive option for investors seeking to diversify their portfolios. While China’s government has imposed a ban on digital asset trading, OTC services offer a discreet method of exchanging yuan for cryptocurrencies without going through regulated exchanges.
“Given the regulatory context in China, including the ban on trading and mining of cryptocurrency, these services invariably fall in a gray zone of the economy,” said Eric Jardine, the cybercrimes research lead at Chainalysis.
The study found that approximately 55% of the total value received by Chinese OTC traders comes from transfers worth more than $1 million, indicating significant interest from both wealthy individuals and businesses.
While China’s authorities have taken steps to crack down on crypto-related activities, the borderless nature of the industry makes it challenging to enforce these restrictions. The recent police raids on illicit foreign-exchange transactions further highlight the use of cryptocurrencies as a means of circumventing regulations.
Despite the growing popularity of OTC trading in China, experts caution that the regulatory landscape remains uncertain. While Hong Kong has emerged as a crypto hub, Chinese citizens face restrictions in accessing crypto investments from the mainland.
