Underground Crypto Trade Booms in China Despite Crackdown

Despite China’s intense government efforts to regulate cryptocurrency, the underground market for digital assets is thriving. In 2024, over-the-counter (OTC) crypto transactions reached an astounding $23.7 billion, reflecting the resilience and creativity of Chinese investors navigating the country’s hostile regulatory environment.

Surging Crypto Activity Amid Tight Regulations

China’s government has imposed strict bans on cryptocurrency since 2021, aiming to suppress digital trading. However, instead of dwindling, the crypto market continues to grow. In 2024, the volume of OTC transactions skyrocketed, tripling compared to the same period in 2021.

How Chinese Investors Keep the Market Alive

Several factors contribute to the ongoing success of the crypto market in China:

High Demand for Crypto: Many Chinese investors still view cryptocurrency as a valuable tool to diversify their investments and protect wealth against inflation.
OTC Trading: Over-the-counter desks provide a degree of privacy and flexibility, helping investors bypass regulatory barriers.
Decentralized Platforms and VPNs: Investors are also using peer-to-peer exchanges and VPNs to disguise the origin of transactions, avoiding detection by authorities.

Chinese citizens use crypto to preserve wealth

After the Chinese government shut down access to mainstream crypto exchanges in 2021, users began to look elsewhere, turning to over-the-counter (OTC) platforms and P2P trading networks. If we look at a selection of China-based OTC platforms, we see tremendous growth, particularly since mid-2023. Many of these platforms have capitalized on the enduring interest in crypto among Chinese investors and found innovative ways to facilitate crypto trading, and some have adapted to the regulatory environment. (source)

Risks of Operating in the Underground Crypto Market

While Chinese investors find innovative ways to access the market, engaging in this underground trade is risky. Participants expose themselves to potential fraud, theft, and legal consequences as the government continues to crack down on illegal crypto activities. Even after dismantling a major underground network, the demand for digital assets remains strong, and investors continue to take significant risks to participate in the thriving crypto market.