Chinese investors have been revealed to defy strict cryptocurrency bans. Despite the strict ban on cryptocurrency trading and mining imposed by the Chinese government since 2021, an increasing number of Chinese investors are transferring millions of dollars into cryptocurrencies every day. The rebellion is fundamentally driven by economic uncertainties and turbulent stock markets. As a result, both individual and institutional investors are bypassing China’s strict cryptocurrency bans by taking advantage of the crypto-friendly environment in Hong Kong.
Economic Uncertainties Lead Chinese Investors to Cryptocurrencies
Shanghai finance manager Dylan Run reported that due to economic uncertainties in China, the focus of investors has shifted, leading to a trend towards cryptocurrencies. According to Reuters, problems in the Chinese economy and traditional markets have driven investors like Dylan Run to cryptocurrencies as safer havens. Notably, despite the government’s strict cryptocurrency ban, investors are exploiting loopholes by trading cryptocurrencies through grey market brokers using rural bank cards and keeping their transactions secret to avoid regulatory scrutiny.
Currently operating in a grey area, Chinese investors are using creative methods to access cryptocurrencies. Although the trading of cryptocurrencies like Bitcoin (BTC) is banned in China, investors are still facilitating the trading process by using cryptocurrency exchanges such as OKX and Binance, as well as over-the-counter (OTC) channels. In addition, the adoption of cryptocurrencies in Hong Kong, which has given the green light to cryptocurrencies, is encouraging Chinese investors to use their annual forex quotas to invest in cryptocurrency accounts in the region.
Cryptocurrency data platform Chainalysis reported a significant increase in cryptocurrency-related activity in China despite the ban. According to the data, the country generated an estimated $86.4 billion in raw transaction volume between July 2022 and June 2023. This robust transaction activity and high volume overshadowed Hong Kong’s $64 billion transaction volume for the same period. Moreover, the proportion of large individual transactions in China exceeds the global average, confirming that individual investors are turning to cryptocurrencies despite the strict bans.
The Underground Market in Hong Kong
The strict cryptocurrency ban in China has led to the emergence of regulated cryptocurrency exchanges and trading platforms in Hong Kong, meeting the demand of Chinese investors. For example, offline stores like Crypto HK, a member of the underground cryptocurrency market in the region, allow customers to buy cryptocurrencies without going through strict identity verification.
Market observers believe that Chinese authorities understand both the disruptive potential and the immense opportunities of the cryptocurrency market, and therefore strategically support cryptocurrency trading in Hong Kong. For now, Hong Kong is seen as a testing ground for potential changes in the Chinese government’s attitude towards cryptocurrencies, being a special administrative region.
