After Chinese financial institutions recently banned the use of bitcoin (BTC) and crypto-currencies in payment services, investment funds and savings, their underground use has increased, according to some reports. The Chinese government sees crypto-assets as a risk because they are "not backed by real value" and because of their high market volatility.
In this sense, over-the-counter crypto-currency platforms have boomed in the Asian nation, installed since 2017 when domestic exchanges were banned. According to a Bloomberg report, these types of platforms, which operate clandestinely, have increased their operations since then.
Since the beginning of May, when this ban was announced, the fact that the exchange rate between the Chinese yuan and the stablecoin Tether has fallen by as much as 4.4% has become an indicator among the public. After this warning from the local authorities, it recovered more than half of the loss, according to crypto data platform Feixiaohao, a Chinese equivalent of CoinMarketCap.
This movement has also given rise to a proliferation of local OTC (Over The Counter) platforms, as well as peer-to-peer (P2P) networks. Due to the untraceable nature of these platforms, local authorities may find it difficult to enforce a blanket ban.
According to the US news agency, the above may come as a relief to global crypto-currency enthusiasts after concerns were raised around a decline in BTC trading in the Asian nation. According to data recorded by the news agency, nearly $1 trillion worth of digital assets have been traded in China since mid-May.
Losses and the crackdown on crypto-currencies
Bloomberg interviewed a man identified as "Charles" about losses due to the recent price drop and censorship of crypto-currencies in China. The 35-year-old real estate consultant, based in Shanghai, said the issues were not important to him. He said he has been buying crypto-currencies since 2017 and claimed to have lost $11 million in three days during the recent downturn. He added: "For me, that's giving back the gains I've made over the last few months. "I'm looking at the 10-20 year horizon," he added.
On the other hand, Chinese state media are going back to the fact that before local authorities banned crypto-currency trading in 2017, investors owned around 7% of the world's bitcoins and accounted for around 80% of trading.
Bitcoin is the crypto-currency with the most restrictions in China. Source: YouTube.
The ban on exchanges has made it impossible to measure these figures at present, but it is still widely accepted that Chinese investors have a significant presence in the crypto-currency world through domestic OTC platforms and exchanges in other jurisdictions that they access via virtual private networks.
China has banned bitcoin seven times
Since 2013, the Asian nation has restricted any type of exchange, marketing or promotion of bitcoin or other cryptocurrencies at least seven times.
As CryptoNews has reported, the Asian giant has a strained relationship with BTC as a crypto-currency, but has been more flexible when it comes to digital mining. However, the latter aspect of the industry is also beginning to change with new provisions in the Inner Mongolia region, for example.
Chinese restrictions on trading bitcoin and other crypto-currencies could affect business innovation in the Asian country, thought Sheila Warren, who led the World Economic Forum (WEF) on blockchain and digital assets in May 2021.
Sheila Warren, deputy director of the Centre for the Fourth Industrial Revolution at the WEF, said the development of blockchain projects in China has been slow, and could be even slower after recent measures restricting crypto-currency trading.
Translated with www.DeepL.com/Translator (free version)
