A year ago today China’s central banks temporarily scared the cryptocurrency community when they stopped bitcoin exchanges from operating. Since then the top mainland-based digital asset exchanges moved abroad to more friendlier regions, but Chinese citizens are still acquiring bitcoin whether the People’s Bank of China likes it or not.
Chinese Citizens Continue to Bypass the Cryptocurrency Exchange Ban
Last year the People’s Bank of China stopped domestic cryptocurrency exchanges from dealing with trades tied to the country’s legal tender, the renminbi. Following the month of uncertainty, Chinese traders took to the streets and acquired bitcoin through over-the-counter OTC dealers. The first week of February shows a small jump in volume according to Localbitcoins statistics but the following week trade volume quadrupled. Following this spike, week after week all year long China has seen consistent Localbitcoins trade volumes and all-time highs. Additionally, many of the mainland exchanges moved to areas like Singapore, Hong Kong, and South Korea offering OTC services.
Surging OTC Trade Volume and 10-20% Digital Asset Premiums
OTC trading platforms are being offered by the firm’s Huobi, OTCBTC, and Okex and the trading is more similar to eBay bidding than traditional cryptocurrency trading. According to a recent report, Chinese buyers pay with methods like Wechat Pay and Alipay. Additionally, Chinese buyers are paying a premium that’s 10 to 20 percent higher than the global average. For instance, on January 18 reports recorded the price of bitcoin to be roughly $11,730 but on Huobi’s OTC platform one BTC traded for $13,085. Alongside the significant premiums, traders from other areas of the world are finding arbitrage opportunities dealing with Chinese cryptocurrency investors.
Much like domestic exchanges all around the world, crypto-OTC trading platforms in that area see intense volumes. The Taiwan-based platform OTCBTC claims it’s processed over $100Mn USD worth of transactions during the company’s first fifty days. One seller on Huobi’s platform has seen “more than 10,000 separate bitcoin transactions in the past month.”
Just Don’t Mention ‘BTC’ In Your Bank Transfer
Even though Chinese investors are finding ways to purchase cryptocurrencies without mainland exchanges, OTC platforms caution buyers about mentioning specific terminology in bank transfers.
“Buyers should only put the order reference in the note for money transfer — To avoid your transfer from getting delayed, please don’t mention BTC, bitcoin or any other characters related to cryptocurrencies,” Says Huobi Pro’s message to customers on the trading platform’s user agreement.