Although China has banned crypto trading and mining since 2021, many mainland investors have begun to pour into the crypto market in the face of sluggish performance in traditional areas such as the stock market and real estate. For these investors, crypto assets are safer than the domestic stock market and real estate market and are regarded as a safe-haven asset, similar to gold.
Crypto data platform Chainalysis said China’s crypto-related activity has rebounded, with its global ranking of peer-to-peer transaction volume jumping from 144th in 2022 to 13th in 2023.
Chainalysis said that despite the ban, China’s crypto market had an estimated raw trading volume of $86.4 billion between July 2022 and June 2023, dwarfing Hong Kong’s $64 billion in crypto trading. The proportion of large retail transactions between $10,000 and $1 million is almost double the global average of 3.6%.
Obtaining Bitcoin in mainland China is not that difficult, according to a Reuters survey of online cryptocurrency exchanges and interviews with retail investors. Exchanges such as OKX and Binance are still providing trading services to Chinese investors and directing them to use fintech platforms such as Ant Group's Alipay and Tencent's WeChat Pay to exchange yuan for stablecoins with traders to trade cryptocurrencies.
However, Chainalysis stated in the report that because cryptocurrencies are banned in mainland China and there are strict controls on cross-border capital flows, most crypto activities in China are still conducted through over-the-counter transactions or informal gray market peer-to-peer businesses. China’s The underground cryptocurrency market is booming, with daily trading volume reaching millions or even tens of millions of dollars.
After Hong Kong publicly recognized digital assets last year, Chinese citizens are also taking advantage of the annual US$50,000 foreign exchange purchase quota to transfer funds to cryptocurrency accounts in Hong Kong.
An executive at a Hong Kong cryptocurrency exchange said China's economic downturn "makes investments on the mainland risky, uncertain and disappointing, so people are looking to allocate assets overseas." The executive declined to be named due to the sensitivity of the topic. Bitcoin and crypto assets attract such investors, he said: "We see mainland investors entering this market almost every day."
Interest from domestic investors has also prompted Chinese brokers and financial institutions to explore crypto-related businesses. Due to the lack of growth opportunities in the domestic market, these institutions began to seek new growth points in businesses related to crypto asset trading in places such as Hong Kong. For example, the Hong Kong subsidiary of Bank of China, China Asset Management Company and Harvest Fund Management Co., Ltd. are all exploring the business of engaging in digital asset trading in Hong Kong.
Today, brick-and-mortar cryptocurrency exchanges are popping up along Hong Kong’s busy business and shopping streets. These offline stores are lightly regulated. At CryptoHK, a popular cryptocurrency store in the Admiralty District, customers can buy cryptocurrencies for at least HK$500 ($64) without providing any identification documents.
Tiger International, an online brokerage listed on Nasdaq in the United States, and its Hong Kong subsidiary Tiger Securities announced late yesterday (25th) that it has obtained the conditions for upgrading its first-class license from the Hong Kong Securities Regulatory Commission. In the future, professional investor clients can Tiger Trade, a trading platform of Tiger Brokers, trades virtual assets.
Tiger Brokers stated that Hong Kong residents with investment assets of more than 8 million yuan, or institutions with assets of more than 40 million yuan, can trade virtual assets, including Bitcoin and Ethereum, on Tiger Trade in the future.
Although Hong Kong is autonomous, it is also a special administrative region of China. These developments "sparked speculation that the Chinese government may be interested in cryptocurrencies, and that Hong Kong may be a testing ground for these efforts." Some believe that while mainland China recognizes the disruptive nature of Bitcoin, it also Its huge potential has led it to silently support crypto trading in Hong Kong to gain a foothold in the booming crypto business in financial centers such as Singapore and New York.
Summarize
In short, the trend of Chinese investors pouring into the crypto market shows their urgent need for hedging and seeking new growth points. Despite certain regulatory and risk challenges, the crypto market offers investors a diverse and potentially huge investment opportunity. As China's crypto market develops and regulation further improves, investors will continue to pay attention to developments in this area and seek to derive benefits and growth from it.
