A recent study has found that over-the-counter (OTC) crypto traders from China have been attracting huge inflows for quite some time now. This reflects on China’s increasing hunger for alternative investments.
China is currently observing a downfall in its equity and property market. The country’s economy has been struggling to maintain its stature for quite some time now, making it look for alternate methods of inviting more inflow of investment.
A recent study conducted by Chainalysis Inc. has disclosed that Chinese investors have attracted cash inflows of around $20 billion each in the three quarters of 2024 till now. In these nine months, estimates claim that over $75 billion of inflows have been attracted by the Chinese investors.
Source: Chainalysis Inc. Increased Crypto Investment Despite Ban
The massive figures of crypto inflow into the Chinese economy have been observed despite a three-year ban on crypto trading in the country. Chinese crypto traders have overpowered the risk of money laundering and currency outflow to gain huge profits from the blockchain economy.
OTC services help Chinese traders to exchange their currency (Yuan) with tokens discreetly. They are not required to make a transaction on a crypto exchange that owns a public orderbook. These investors are also involved in peer-to-peer trading which involves investors directly transacting with each other in crypto.
Eric Jardine, the cybercrime research lead at Chainalysis stated that these services fall into the economic gray zone due to the regulatory ban on crypto-mining in China. He further added that there is a possibility of loose enforcement of crypto-laws in China, due to which the crypto traders are easily earning money without being caught.
Over Half Transactions Worth More Than $1 Million
In the same research, Chainalysis has also found out that around 55% of the investments received through OTC from China are worth more than $1 million. But one thing is not sure till now whether those transactions were made by wealthy investors or there is some concept of cumulative investing where small investments from multiple customers are summed up to make a huge amount.
Jardine also stated that such services will continue to flourish until China starts to favor crypto-mining and trading.
Multiple doubtful activities have pointed towards a continuous (secret) crypto-activity in China. Recently, some Chinese businesses have been found settling records with Russian commodities firms through cryptocurrencies.
The Challenge of Enforcing Crypto-Laws
Angela Ang, blockchain intel firm TRM Labs’ senior policy adviser Angela Ang commented on this issue. She said that Chinese enforcement can be seen cracking down on crypto-backed crime and has tightened Anti Money Laundering regulations across the country. But she feels that all this is only on the forefront, the background reality is something different.
Ang says that considering the multifaceted and dynamic blockchain industry, imposing a crypto ban is difficult.
Although there is a permit for crypto-trading in Hong Kong from 2022, regulators prevent people from the Chinese mainland from accessing crypto investments over there. To curb the need for investors to earn from crypto, the Chinese government is taking strong actions to pull back its ailing stock market. Only time will tell if this will effectively reduce the investments in cryptocurrencies from the Chinese market.