Despite China's 2021 cryptocurrency ban, mainland Chinese citizens are finding creative ways to acquire Bitcoin through thriving "gray market" channels, with demand roughly quadrupling on a quarterly basis since the restrictions were implemented.
While Hong Kong now offers regulated Bitcoin investment products, mainland Chinese residents remain prohibited from participating in these markets. However, over-the-counter (OTC) trading has emerged as a popular alternative, allowing people to circumvent official restrictions.
According to data from Chainanalysis, Chinese OTC trading volumes have increased substantially since 2021. Many OTC services operate as informal merchant networks affiliated with major exchanges, facilitating trades between Yuan and cryptocurrencies.
Former Chinese exchange executive Nino Feng revealed that most Bitcoin purchases occur through OTC dealers who partner with exchanges. These merchants typically request wire transfers to local Chinese bank accounts, often registered with smaller rural banks. Tether (USDT) trading is particularly prevalent due to lower spreads compared to direct Bitcoin trades.
The cryptocurrency ban's enforcement appears inconsistent across China. Active cryptocurrency trading discussions continue openly on social media platforms, with Mandarin-language trading rooms regularly hosting livestreamed trading sessions. The Bitcoin Asia 2024 conference notably attracted numerous mainland Chinese attendees.
While Chinese courts recognize Bitcoin as property, the government maintains restrictive policies. Some Chinese academics have questioned the wisdom of the cryptocurrency ban, though an official policy reversal seems unlikely. The government reportedly holds approximately 15,000 Bitcoin from previous seizures.
Hong Kong's emergence as a regulated crypto hub creates an interesting dynamic, though mainland investors remain restricted from participating. Chinese companies continue manufacturing mining equipment, though export restrictions affect shipments to markets like the United States.
The persistent demand for Bitcoin and Tether from Chinese investors, despite official bans, represents a notable factor in global cryptocurrency markets. This underground ecosystem demonstrates both the challenges of enforcing crypto restrictions and Chinese citizens' ongoing interest in digital assets.