China’s government had shocked the world recently when it announced that Bitcoin (BTC) mining was to be banned in the country going forward. This caused the price and value of BTC to plunge exponentially, and the recent announcement by Elon Musk that BTC will not be accepted by Tesla anymore (thus eliminating an important use case for the flagship crypto) only made matters worse.
Nevertheless, it would seem as if cryptocurrency assets are still relatively in quite high demand in China despite the looming threats based around crypto. These threats have seemingly not done much to crush the interest that the locals do have for the fastest-rising digital finance industry.
OTC trading desks
As Beijing continues its crackdown on crypto, many traders had thus decided to bypass any kind of regulatory oversight through the use of OTC (over the counter) trading desks. There had hence been an impressive and steady rise in the number of individuals who utilized OTC platforms within the past month. This coincided with the country increasing the various restrictions being put in place, which, when administered, will effectively prevent any and all payment companies as well as financial institutions from being able to provide various crypto-related services.
Of course, it would be difficult to ascertain the exact amount of volume data due to the fact that OTC transactions in China tend to be peer-to-peer and also utilize 3rd party payment platforms. However, the rate of exchange prevalent between USDT (Tether) and the country’s official national currency, the yuan, have been observed to be a key indicator of the market attitude and sentiment for the local cryptocurrency users. As such, it was noticed that USDT’s demand had actually risen when market downturns occurred.
Risk of capital outflows
The crackdown on cryptocurrency in China can be due to one critical factor in particular, which is that of capital outflows. It has therefore been discussed that over-the-counter trading may not necessarily present the same kind of capital flight risks which have often come to be associated with the more typical exchanges, which would imply that regulators might not desire to be as heavy-handed while addressing the sector as expected.
China had initially implemented a nationwide cryptocurrency-related ban for the various exchanges back towards the end of 2017, which also mirrors the same kind of situation that we find ourselves in today. The traders in China are more or less still widely thought of as representing a large share of the respective global cryptocurrency trading activity despite the news of the recent ban on BTC mining.