China’s over-the-counter (OTC) cryptocurrency brokers are seeing record inflows as investors look for alternatives to weak stock and property markets in a slowing economy.

According to a recent report by Suvashree Ghosh for Bloomberg, citing a study by Chainalysis Inc., OTC brokers received over $20 billion in each of the first three quarters of 2024, amounting to a $75.4 billion total over the nine-month period—an all-time high in data tracking back to 2021.

Despite Beijing’s three-year-old ban on digital asset trading, Chainalysis reports that Chinese demand for crypto remains robust. OTC services are popular because they allow investors to discreetly exchange yuan for crypto without using exchanges with public order books. Peer-to-peer (P2P) trading offers another private alternative for crypto transactions in China.

Eric Jardine, Chainalysis’ cybercrimes research lead, commented that these OTC services operate in a legal gray area. He noted that while Chinese authorities continue to enforce crypto bans, enforcement has been relatively loose, allowing these services to thrive.

Data from Chainalysis shows that 55% of the total value received by OTC brokers came from transactions over $1 million, though it remains unclear whether these transfers are from wealthy individuals or businesses acting for smaller customers. Jardine predicts that OTC services will keep growing unless China’s regulatory stance on crypto changes.

Crypto’s ongoing role in China is further highlighted by its use in cross-border transactions. According to sources familiar with the matter, Russian commodities firms have used digital assets for trade settlements with Chinese clients.

While China has cracked down on crypto-enabled crime and tightened anti-money laundering measures, Angela Ang of TRM Labs noted that enforcement is challenging due to the borderless nature of cryptocurrencies.

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