Disillusioned by the downturn in the Chinese economy and stock markets, the local residents are increasingly diversifying their investments into cryptocurrencies – even if it means going to great lengths for the banned Bitcoin.
Bitcoin cryptocurrency – artistic photo. Image credit: Pexels, free license
Despite the ban on crypto trading and mining in China since 2021, people are utilizing bank cards from small rural commercial banks to purchase cryptocurrencies through unofficial channels, keeping each transaction below 50,000 yuan ($6,978) to avoid scrutiny.
More and more Chinese residents are viewing Bitcoin as a secure asset similar to gold, Reuters wrote in a recently published article.
A growing number of Chinese investors are exploring innovative methods to acquire bitcoin and other crypto assets, perceiving them as a safer alternative to investing in the unstable domestic stock and property markets.
Operating within a regulatory grey area, individuals in mainland China engage in cryptocurrency trading despite the ban on such activities and stringent controls on cross-border capital movement. Popular crypto exchanges like OKX and Binance, along with over-the-counter channels, facilitate the trading of tokens such as Bitcoin.
Despite the restrictions, mainland investors find ways to participate, including opening overseas bank accounts to acquire crypto assets. Capitalizing on Hong Kong’s favorable stance on digital assets, Chinese citizens leverage their $50,000 annual forex purchase quotas to transfer funds into cryptocurrency accounts in the region. According to Chinese regulations, these funds are officially earmarked for purposes like overseas travel or education.
As retail investors flock to cryptocurrencies, Chinese brokers and financial institutions are closely following suit. Facing limited growth prospects domestically, many of these entities are venturing into crypto-related businesses in Hong Kong.
Several major Chinese financial institutions, including Bank of China, China Asset Management (ChinaAMC), and Harvest Fund Management Co, are actively exploring ventures in Hong Kong that involve digital assets.
Despite restrictions, accessing Bitcoin in mainland China is not overly challenging. Platforms like OKX and Binance continue to provide trading services for Chinese investors, guiding them to utilize fintech platforms such as Ant Group’s Alipay and Tencent’s WeChat Pay to convert yuan into stablecoins for cryptocurrency transactions.
Despite being prohibited, the Chinese crypto market demonstrated a substantial estimated raw transaction volume of $86.4 billion from July 2022 to June 2023, surpassing Hong Kong, which saw $64 billion in crypto trading, as reported by crypto data platform Chainalysis. Notably, the proportion of large retail transactions falling within the $10,000-$1 million range is nearly double the global average of 3.6%.
The crackdown on China’s property sector over the past three years has adversely impacted home prices, traditionally a cornerstone in household savings portfolios. The stock market, represented by the benchmark CSI 300 Index, has experienced a 50% decline in value since early 2021.
In contrast, Bitcoin has surged by 50% since mid-October, known for its volatile nature. Some players in this market segment speculate that Chinese officials are well-aware of the disruptive potential of Bitcoin but also recognize its substantial possibilities.
Hong Kong, despite its autonomous governance, remains a Chinese special administrative region. These developments have sparked speculation that the Chinese government may be warming to cryptocurrency, with Hong Kong potentially serving as a testing ground for such efforts.
Written by Vytautas Valinskas