China’s Underground Crypto Trading hits $75 billion despite Ban on Crypto.
Despite China’s official cryptocurrency ban, recent reports highlight the country’s thriving underground crypto trading scene, which has amassed an astonishing $75.4 billion in just nine months. A study by Chainalysis indicates that over-the-counter (OTC) cryptocurrency brokers in China have seen inflows of billions of dollars, suggesting that the ban has done little to curb the appetite for digital currencies.
According to the report, inflows reached more than $20 billion in each of the last three quarters leading up to June 2024. This surge in underground trading comes at a time when China’s traditional markets—particularly in equity and real estate—are underperforming, driving investors to explore alternative investments like crypto.
Chinese investors have increasingly turned to OTC services, which allow them to discreetly swap yuan for digital assets without the need for public exchanges. This growth in underground trading highlights the apparent lack of strict enforcement of the 2021 ban on crypto trading and mining. Eric Jardine, Chainalysis’ cybercrimes research lead, noted that these OTC services operate in a “gray zone,” and speculated that the “loose enforcement” of the ban is fueling this sector’s growth.
While China’s economy continues to struggle, investors are turning to cryptocurrencies as an alternative store of value. Meanwhile, Hong Kong has taken a different approach, transforming into a crypto hub and permitting digital asset trading since late 2022, offering a stark contrast to China’s crackdown.
Interestingly, 55% of the total value handled by China’s OTC traders comes from transactions worth over $1 million, indicating that the underground market includes significant financial activity despite regulatory restrictions.
Changpeng Zhao, the founder of Binance and a major figure in the crypto space, hails from China, underscoring the nation’s ongoing influence in the industry despite its official stance against cryptocurrency.
