Chinese crypto traders are reportedly continuing to trade in the market, despite regulatory scrutiny, by using over-the-counter (OTC) platforms.
Crypto traders using OTC platforms in China are circumventing crackdown efforts by authorities, according to a Bloomberg report published on May 31. The report notes that these traders have been doing this since China began imposing tighter restrictions in the market around 2017.
China is a hotbed of cryptocurrency activity, in both trading and mining. The government has been regulating the market alongside working on the release of a Central Bank Digital Currency (CBDC), which is far along in its release cycle.
Using OTC platforms and decentralized platforms makes it difficult for transactions to be traced, which has been a pain point for regulators the world over. These investors told Bloomberg that “they don’t care” and are looking to continue investing in crypto for the long term.
The fact that Chinese traders are continuing to participate is demonstrably true, as it is well known that China is a major part of the market. The country recently ordered financial institutions and payment platforms not to provide services that had anything to do with cryptocurrencies.
But this ban is hard to enforce in practice, as the decentralized nature of cryptocurrencies makes it difficult to trace transactions and hold any one individual accountable. Decentralized exchanges (DEX) have been growing tremendously in usage in the past year, and are being used globally. The ban does not extend to the holding of cryptocurrencies, however.
Traders use OTC platforms in conjunction with separate fiat-based payments platforms to conduct their untraceable transactions. The government has tried another tactic, which is to warn investors of the risks associated with investment in cryptocurrencies, namely volatility and the lack of investor protection.
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The Chinese government’s crackdown has led to Huobi stopping mining services in the country, in addition to cutting futures and leverage-based investment vehicles in some countries. Huobi was planning to expand to Hong Kong as this development broke.
According to Bloomberg’s sources, authorities are looking into transactions that may have been related to money laundering and terrorism financing. It also says that investors have been targeted by the police, being asked to sell holdings and delete related apps.
Interestingly, China has also said that bitcoin is an “investment alternative,” making it difficult to truly gauge where authorities stand. Billionaire Venture Capitalist Peter Thiel has said that the country is using Bitcoin as a “financial weapon.”
BeInCrypto has reached out to company or individual involved in the story to get an official statement about the recent developments, but it has yet to hear back.