Underground Crypto Trading in China Hits $75 Billion Following Crypto Ban

The official cryptocurrency Ban in China has done little to stop the Chinese appetite for crypto as recent reports reveal that underground crypto trading in the country hit $75.4 billion over 9 months.  

A recent study by Chainalysis revealed that underground trading in the country is booming despite the official ban and Over-the-counter cryptocurrency brokers have attracted serious inflows totaling $75.4 billion in 9 months ending in June 2024.  

The study revealed that throughout the nine months inflows topped $20 billion in each of the three quarters leading up to June.  

The heightened interest in cryptocurrency in China comes at a time when China’s traditional, equity, and property markets are grossly underperforming leading to investors seeking new investment alternatives.  

OTC services have become quite popular among Chinese investors who discreetly swap the chines yuan for digital tokens without patronizing public crypto exchanges.  

These services operate fully underground as China imposed a ban on cryptocurrency trading and mining in 2021. The continued growth of this underground market suggests that enforcement of the ban may be less strict than initially thought. 

Eric Jardine, the cybercrimes research lead at Chainalysis, commented on the situation, saying, 

“Given the regulatory context in China, including the ban on trading and mining of cryptocurrency, these services invariably fall in a gray zone of the economy.” 

Eric argued that the loose enforcement of the ban might be contributing to the growth of the underground sector.  

The growth of China’s underground crypto market is happening at a time when the Chinese economy is struggling with weak performance in traditional investment sectors.  

Chinese investors are turning to crypto as an alternative store of value and potential growth opportunities. 

Another Asian country Hong Kong has taken a different approach to cryptocurrencies. The city pivoted towards creating a crypto hub in late 2022, allowing digital asset trading within its jurisdiction. 

This is a sharp contrast to China’s approach which outrightly banned cryptocurrency trading and mining in the country.  

As China’s economy continues to face challenges, the underground crypto market continues to blossom in response.  

Jardine predicts that until the regulatory situation in China becomes more favorable towards crypto, I would expect services such as these to continue to grow over time.  

What to Know  

• China despite its crypto ban is home to some of the most influential crypto personalities in the industry. Changpeng Zhao the founder of Binance is a Chinese Canadian citizen.  

• The Chainalysis reports revealed that approximately 55% of the total value received by China’s OTC traders comes from transfers worth more than $1 million.