Bitcoin Traders Defy PBOC Crackdown
Just a few weeks after the PBOC banned fundraising through token launches and ordered some Bitcoin exchanges to shut, casting a chill over the cryptocurrency industry, Chinese traders say that the market is far from dead.
While several exchanges announced that they will close Saturday, 30 October, traders have now moved to buy and sell Bitcoin directly with each other on peer-to-peer marketplaces and messenger apps.
Industry insiders say some overseas-based ICOs (initial coin offerings) are still being marketed.
Although the crackdown has dissuaded large swathes of less-experienced investors from participating in the trade, market participants point to the limits Chinese regulators ultimately face in controlling the industry, where many users are anonymous and difficult to track.
In the short-run, the crackdown has also created an arbitrage opportunity for investors, with the price of Bitcoin in China now trading at a discount to overseas exchanges.
“They can’t set rules to stop me from investing in what I want to invest in. They say you are protecting me, but as long as I think this is good, they have no way to intervene,” said an anonymous Chinese Bitcoin investor.
“I can do over-the-counter trades or I’ll go offshore…My wallet is my wallet. I’ve never registered my identification card.”
The Chinese government on 4 September ordered ICOs to cease and soon after ordered some cryptocurrency exchanges to shutter.
Over 15 exchanges, including the 3 largest players OkCoin, Huobi and BTCChina, have since announced that they will close their mainland businesses by the end of September.
While the clampdown caused the Bitcoin price in China to tumble as much as 8% on the day of the announcement, it has since recovered to RMB Yuan 24,101 ($3,615.67) on Chinese exchange Huobi.
On US exchange Bitstamp, BTC it currently trades at $4,205.
Trading has spiked generally on peer-to-peer marketplaces, according to data website Coindance.
On OTC platform LocalBitcoins, China trading volumes more than 2X in the week starting 16 September from the previous week to RMB Yuan 74-M. It hit an all-time-high in the week starting 23 September, reaching RMB Yuan 115-M in trades.
Michael Foster, co-Founder of localethereum.com, an OTC (over-the-counter) marketplace for ethereum trading, said Mainland China users accounted for 20% of its 5,000 signups since it opened for registrations this past Tuesday.
“The fact that Bitcoin is still being traded is an indication that China is not looking to eliminate them, but reposition things in a way to have better control over them,” said the founder of New York-based Coinsetter, a Bitcoin exchange.
Other Chinese cryptocurrency players said traders were also moving away from using Tencent’s (OTCMKT:TCEHY) WeChat app, to encrypted messenger app Telegram to avoid regulatory scrutiny.
Some said they were still seeing overseas-based ICOs being marketed in China.
The 4 September shutdown of ICOs stipulated that Chinese citizens were not allowed to invest in ICOs. Overseas ICOs have been returning money on a voluntary basis.
“The trend of digital currency transactions moving offshore is inevitable,” Zeng Danhua, the co-author of a Bitcoin investment guide, told a television program filmed by Chinese financial news outlet Yicai Wednesday. “The regulators may have needed to shut the platforms to guard against financial risks, and there may be a Bitcoin bubble, but its investment value persists.”
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