Chinese cryptocurrency traders are thriving despite the strict measures implemented by the country against mining and digital currency transactions. In 2020, China dominated the global Bitcoin (BTC) mining hashrate, accounting for over 75% of the market. However, a government crackdown on all cryptocurrencies changed the landscape. Despite this, recent regulations seem to be slightly relaxed as investors search for promising new assets.
Chinese Bitcoin traders are still a major force in the market, particularly during the recent cryptocurrency sell-off. Their participation is driven by market price fluctuations rather than new constraints imposed by Chinese regulators. Despite the ban, Chinese traders continue to trade billions of dollars worth of cryptocurrencies.
According to Chainalysis, between July 2022 and June 2023, the Chinese cryptocurrency market processed $86.4 billion in crypto transaction volume. Large retail transactions in China, ranging from $10,000 to $1 million, make up 3.6% of the total, nearly double the global average. Chainalysis experts suggest 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, investors have found ways to bypass restrictions. Reuters reports that losses in the Chinese stock market have driven investors back to cryptocurrencies in recent years. Financial executive Dylan Run in Shanghai referred to Bitcoin as a “safe haven, like gold,” and started shifting some of his funds into cryptocurrencies in early 2023. Cryptocurrency trading remains accessible in China, with citizens using platforms like OKX and Binance, as well as over-the-counter methods and foreign bank accounts to trade digital tokens.
With the cryptocurrency ban in place, Chinese investors have become creative in managing their funds. For example, Dylan Run used bank cards from small rural banks to purchase cryptocurrencies through unofficial dealers, keeping transactions under 50,000 yuan to avoid drawing attention from authorities. Traders have found various ways to transfer cryptocurrencies, including cash or bank transfers, with cities like Chengdu and Yunnan becoming hubs for traders seeking to avoid government scrutiny.
In Hong Kong, Chinese citizens are allowed an annual foreign currency purchase of $50,000, which some use to buy cryptocurrencies in the Hong Kong market. As China’s real estate market struggles, more citizens may turn to cryptocurrencies for investment opportunities. The country’s property market ended 2023 with the steepest fall in new home prices in nearly nine years, despite government efforts to support the sector.
Chinese investors are increasingly turning to social networks like WeChat and Telegram for cryptocurrency trading, connecting with others in specialized groups to bypass centralized exchanges. In rural areas, where enforcement is less strict, physical trading of digital assets is common, with traders meeting in public places to exchange wallet addresses or conduct transactions.
The relationship between China and Hong Kong is growing closer, with some speculating that Hong Kong could become a crypto hub signaling a change in the Chinese government’s stance on digital assets. Some Chinese traders have bypassed geo-restrictions using VPNs to continue trading on platforms like Binance, with exchange employees advising users to evade KYC checks.
The surge in Bitcoin and other cryptocurrencies in China comes as traditional investments underperform. The crackdown on the real estate sector and economic transition have made stocks and real estate less attractive, prompting investors to turn to cryptocurrencies for stability and growth potential. The rise in cryptocurrency investment by Chinese traders reflects a strategic shift in response to changing economic and regulatory conditions.