Cointime

Download App
iOS & Android

Bruised by stock market, Chinese rush into banned bitcoin

From Reuters By Vidya Ranganathan and Summer Zhen

SHANGHAI/HONG KONG, Jan 25 (Reuters) - Dylan Run, a Shanghai-based finance sector executive, started moving a bit of his money into cryptocurrencies in early 2023, when he realized that the Chinese economy and its stock markets were going downhill.

Crypto trading and mining has been banned in China since 2021. Run used bank cards issued by small rural commercial banks to buy cryptocurrencies through grey-market dealers, and capped each transaction at 50,000 yuan ($6,978) to escape scrutiny.

"Bitcoin is a safe haven, like gold," says Run.

He now owns roughly 1 million yuan worth of cryptocurrencies, accounting for half of his investment portfolio, compared with just 40% in Chinese equities.

His crypto investments are up 45%. China's stock market, meanwhile, has been sinking for 3 years.

Like Run, more and more Chinese investors are using creative ways to own bitcoin and other crypto assets that they believe are safer than investing in crumbling stock and property markets at home.

They operate in a grey area. While cryptocurrency is banned in mainland China and there are strict controls on capital movement across the border, people are still able to trade tokens such as bitcoin on crypto exchanges such as OKX and Binance, or through other over-the-counter channels.

Mainland investors can also open overseas bank accounts to buy crypto assets.

After Hong Kong's open endorsement of digital assets last year, Chinese citizens are also using their $50,000 annual forex purchase quotas to move money into cryptocurrency accounts in the territory. Under Chinese rules, the money can only be used for purposes such as overseas travel or education.

China's economic downturn "has made investment on the mainland risky, uncertain and disappointing, so people are looking to allocate assets offshore", said a senior executive of a Hong Kong-based cryptocurrency exchange, who declined to be identified due to sensitivity of the topic.Bitcoin and crypto assets have attracted such investors, he said: "Almost everyday, we see mainland investors coming into this market."As retail investors make a dash for cryptocurrencies, China's brokers and other financial institutions aren't far behind. Starved of growth opportunities at home, many of them are exploring crypto-related businesses in Hong Kong."If you are a Chinese brokerage, facing a sluggish stock market, weak demand for IPOs, and shrinkage in other businesses, you need a growth story to tell your shareholders and the board," said the exchange executive.The Hong Kong subsidiaries of Bank of China, China Asset Management (ChinaAMC) and Harvest Fund Management Co are all exploring businesses in the territory that deal in digital assets.

ILL-GOTTEN

Access to bitcoin isn't that difficult on the mainland, according to Reuters' checks of online crypto exchanges and interviews with retail investors.Exchanges such as OKX and Binance still offer trading services for Chinese investors, and guide them to use fintech platforms such as Ant Group's Alipay and Tencent's WeChat Pay to convert yuan into stablecoins with dealers, to trade cryptocurrencies.OKX and Binance did not reply Reuters requests for comment.Crypto data platform Chainalysis says crypto-related activities in China have bounced, and its global ranking in terms of peer-to-peer trade volume jumped to the 13th place in 2023, from 144 in 2022.Despite being banned, the Chinese crypto market recorded an estimated $86.4 billion in raw transaction volume between July 2022 and June 2023, dwarfing Hong Kong, which witnessed $64 billion in crypto trading, Chainalysis said. And the proportion of large retail transactions of $10,000-$1 million is nearly twice the global average of 3.6%.Much of China's crypto activity "takes place through over-the-counters or through informal, grey market peer-to-peer businesses," Chainalysis said in the report.Brick-and-mortar crypto exchange stores, have sprouted in Hong Kong's busy business and shopping streets. These offline shops are lightly regulated.At Crypto HK, a popular crypto store in the Admiralty district, customers can buy cryptocurrencies with a minimum HK$500 ($64) and are not required to provide any identity documents.The underground crypto market in China is thriving.Michael Wang, a dealer who helps individuals buy digital assets, says daily volumes run into several million yuan or even dozens of millions.Charlie Wong, a 35-year-old buy-side equity analyst, bought bitcoin via the Hashkey Exchange, an officially recognised marketplace in Hong Kong."It is hard to find opportunties in traditional fields. Chinese stocks and other assets perform poorly ... the economy is undergoing a crucial transition," he said.China's crackdown on the property sector over the past three years has battered prices of homes, which were traditionally the mainstay in household savings portfolios. The stock market has fared even worse, with the benchmark CSI 300 Index(.CSI300), opens new tabdown by half its value since early 2021.Bitcoin, by contrast, has leapt 50% since mid-October, and is known for its wild swings.Wong believes Chinese officials are cognisant of how disruptive bitcoin can be and yet aware of its huge potential, and hence their endorsement of crypto trading in Hong Kong, to keep a toehold in the crypto business booming in financial centres such as Singapore and New York.Hong Kong, though autonomously governed, is a Chinese special administrative region.Chainalysis reckons the developments "have created speculation that the Chinese government may be warming to cryptocurrency and that Hong Kong may be a testing ground for these efforts."($1 = 7.1659 Chinese yuan renminbi)($1 = 7.8197 Hong Kong dollars)

Additional reporting by Shanghai Newsroom Editing by Vidya Ranganathan and Kim Coghill

Comments

All Comments

Recommended for you

  • BTC Falls Below $82,000

    Market data shows that BTC has fallen below $82,000, currently priced at $81,984.48, with a 24-hour decline of 2.01%. The market is experiencing significant volatility, so please ensure proper risk management.

  • BTC Drops Below $83,000

    Market data shows that BTC has fallen below $83,000, currently priced at $83,015.81, with a 24-hour decline of 0.46%. The market is experiencing significant volatility, so please ensure proper risk management.

  • ETH Surpasses $2500

    Market data shows that ETH has surpassed $2500, currently priced at $2500.4, with a 24-hour decline of 0.23%. The market is experiencing significant volatility, so please ensure proper risk management.

  • Standard Chartered Launches Cryptocurrency Trading Service in UAE for High-Net-Worth Clients

    On October 14, Standard Chartered announced the launch of a cryptocurrency trading service in the UAE aimed at high-net-worth clients, having obtained the relevant license from the Dubai Virtual Assets Regulatory Authority (VARA). Eligible clients can buy and sell BTC and ETH directly through their existing Standard Chartered accounts without the need for independent wallets or third-party trading platforms, with the bank responsible for asset custody and transaction settlement. This service is launched in partnership with Zodia Markets and is initially available only to professional investors in the UAE, with plans to expand to other markets in the future. Standard Chartered stated that this is the first direct cryptocurrency trading service offered to wealth management clients and the first of its kind by an international bank in the UAE.

  • US Spot Bitcoin ETF Sees Net Inflow of $175.7 Million Yesterday

    On October 14, according to monitoring data from Farside Investors, the US spot Bitcoin ETF saw a net inflow of $175.7 million yesterday.

  • US Spot Ethereum ETF Sees Net Inflow of $24.8 Million Yesterday

    On October 14, according to monitoring data from Farside Investors, the US spot Ethereum ETF experienced a net inflow of $24.8 million yesterday.

  • Solana to Launch Alpenglow Upgrade on October 21, Aiming for 150 Milliseconds Transaction Finality

    On October 14, Solana announced that the Alpenglow upgrade will officially activate on October 21 at approximately 14:50 UTC. This upgrade will replace the existing TowerBFT consensus with the Votor consensus. After the upgrade, the median transaction finality time is expected to be around 150 milliseconds, compared to the current value of approximately 12.8 seconds. The upgrade supports single-slot migration without the need for node restarts; it will also remove validator voting information from blocks, reducing operational costs. Even if the actual on-chain usage remains unchanged, statistics indicate that the total number of transactions reported is likely to decrease significantly. The current price of SOL is around $107, and there has not been a noticeable market reaction yet. From a narrative perspective, this upgrade is beneficial for Solana's speed and scalability story; however, Solana has experienced multiple network outages in the past, and this upgrade carries execution risks, serving as a potential warning signal.

  • South Korea Plans to Release Cryptocurrency Tax Guidelines Next Month

    On October 14, according to Yonhap News Agency, South Korea plans to release cryptocurrency tax guidelines next month in preparation for the cryptocurrency taxation policy set to be implemented in January 2027. Local traders in South Korea have been petitioning for a delay in the implementation of the tax policy, citing that the current regulations are not clear enough and the supporting infrastructure is still not fully developed.

  • Michael Saylor: New Bull Market Has Started, Bitcoin Expected to Surpass $100,000 Again

    On October 14, Michael Saylor, co-founder and Executive Chairman of Strategy, stated in an interview that Bitcoin has rebounded from its bottom and is expected to break through $100,000 again. He believes that Bitcoin previously bottomed out just below $60,000 and has now risen to the $80,000 range, with further increases anticipated. Saylor noted that improvements in the regulatory environment and banks accelerating their adoption of Bitcoin are driving the market into a new bull phase. He expects that in the coming years, Bitcoin's long-term annualized growth rate will reach 20% to 30%, and Strategy may increase its Bitcoin purchases during the bull market and issue more securities to fund these acquisitions. Additionally, regarding MSCI's consideration to adjust index rules and potentially exclude companies primarily engaged in accumulating assets from global stock indices, Saylor expressed opposition, arguing that such a move could set a negative precedent for the digital asset industry. MSCI is expected to announce its decision this Friday. Last November, JPMorgan estimated that if Strategy were excluded, it could face a risk of up to $2.8 billion in capital outflows.

  • Fed's Williams: One More Rate Hike This Year is Appropriate, No Need for Hikes in 2027

    On October 14, Federal Reserve's Williams stated that one more rate hike this year is appropriate; currently, he believes there is no need for rate hikes in 2027. There are no signs that the labor market is driving inflation, and apart from the AI and energy sectors, no widespread price pressures are observed in other areas.