Crypto Ban Fails To Deter Chinese Investors From Pouring Millions Daily

Despite the strict prohibition of crypto trading and mining by the Chinese government since 2021, many Chinese investors have found ways to circumvent the ban and invest millions of dollars daily in digital assets. This trend reflects the growing dissatisfaction with the domestic economy and the stock market, as well as the attraction of Hong Kong’s more favorable crypto environment.

One of the examples of this trend is Dylan Run, a finance executive from Shanghai, who has shifted his investment focus to cryptocurrencies due to the economic downturn in China. He told Reuters that he sees crypto as a safer haven than the traditional markets, which are facing challenges. He is not alone, as many other Chinese investors are also turning to crypto as an alternative asset class.

However, investing in crypto is not easy in mainland China, where the government has banned trading and mining of tokens like Bitcoin (BTC). To avoid detection and scrutiny, Chinese investors use various loopholes, such as trading through grey-market dealers who accept bank cards from rural banks or using VPNs to access foreign digital exchanges like OKX and Binance. Some also use over-the-counter platforms that connect buyers and sellers directly.

Another option for Chinese investors is to use their annual forex quotas to open cryptocurrency accounts in Hong Kong, where the authorities have been more supportive of digital assets. According to Chainalysis, a crypto data platform, China recorded an estimated $86.4 billion in raw transaction volume between July 2022 and June 2023, despite the ban. This amount surpasses Hong Kong’s $64 billion in crypto trading during the same period.

Hong Kong Emerges As A Crypto Hub For Chinese Investors

The crypto ban in China has also led to the rise of brick-and-mortar crypto exchange stores in Hong Kong, which operate in a lightly regulated manner and cater to the demand of Chinese investors. For example, Crypto HK, an offline shop, allows customers to buy cryptocurrencies without strict identity verification, making it easier and faster for them to access the digital market.

Some observers believe that the Chinese government is tacitly allowing digital trading in Hong Kong, as a way of testing the waters and exploring the potential and opportunities of the digital market. Hong Kong, as a special administrative region, serves as a bridge between China and the rest of the world, and could be a catalyst for future changes in China’s stance towards digital assets.

As the digital market continues to evolve, Chinese investors show their resilience and creativity in defying the crypto ban. Their involvement in the digital market, along with the growth of the Hong Kong market, challenges the assumption that the ban has effectively stifled China’s crypto activities.

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The author’s views are for reference only and shall not constitute any investment advice. Please ensure you fully understand and assess the products and associated risks before purchasing.