Crypto in China: Growth Against All Expectations

Despite China’s complex relationship with cryptos, the market is booming, reaching $86.4 billion in gross transaction volume in one year and overtaking Hong Kong as a major crypto hub. According to a recent report, investors are skilfully circumventing regulation through decentralized channels.

Crypto, a lifeline for Chinese investors

Although China has officially banned all cryptocurrency-related activities in 2021, one report by Reuters reveals growing activity in this market within the country.

Chinese citizens have devised ingenious methods to get around this ban, by exchanging cryptos such as Bitcoin on offshore platforms or using peer-to-peer exchange platforms.

Thus, the gross volume of cryptocurrency transactions in China reached $86.4 billion between July 2022 and June 2023, surpassing the $64 billion traded at Hong Kong over the same period.

This dazzling growth has propelled China from 144th to 13th place in the world peer-to-peer exchange volume rankings.

This reflects investors’ disenchantment with traditional investment options. Between the real estate crisis, falling consumption and the flight of foreign capital, the Chinese economy is running out of steam. In 2021 alone, 6,000 billion dollars will have evaporated from the country’s financial markets. To stem the hemorrhage, the authorities have even banned short selling, at the risk of aggravating the situation.

Against this anxious backdrop, Bitcoin’s decentralization and flexibility are increasingly appealing to Chinese investors. Even in Hong Kong, a financial hub under Chinese influence, cryptocurrency trading volumes now exceed $60 billion.

Towards a softening of the country’s anti-crypto stance?

China’s categorical ban on cryptocurrencies contrasts with Hong Kong’s asserted support, hinting at an ambivalent approach that could suggest a gradual softening of the Chinese government’s stance.

On the one hand, the rapid growth of the crypto market shows that investor demand remains strong in mainland China. What’s more, in the face of the economic slowdown and sluggish traditional stock markets, many Chinese are turning to cryptocurrencies as an alternative.

On the other hand, the Chinese authorities appear to be tolerating cryptocurrency trading via Hong Kong. This allows China to maintain a foothold in this innovative sector alongside other major financial centers such as Singapore and New York.

Rather than taking a clear-cut stance for or against cryptocurrencies, Beijing seems to be navigating between the two options. However, as blockchain increasingly influences its financial system, China will be faced with the need to make a clear choice: accept a partial loss of control or further tighten its restrictive policy.