The Future of Bitcoin Trading in China: Regulatory Workarounds and Rumors

Two months ago, the crypto world was rocked by the Chinese government’s announcement that they’d be banning crypto exchanges indefinitely in China.

This bombshell sent shockwaves through the space, both regarding sentiments and price. Fear, uncertainty, and despair took over the market, and the withdrawal of Chinese investors—hitherto the #1 by volume—caused the price of Bitcoin to acutely sink.

The space in general has stabilized then, with a flood of new Japanese investors filling in the international void left by China’s exchange ban.

But what about the Bitcoin trading situation inside China right now?

Today we’ll be walking you through some of the regulatory workarounds domestic Chinese Bitcoin traders are currently resorting to, as well as the rumors that the Chinese Communist Party (CCP) could be bringing back regulated exchanges in short-order.

Let’s begin.

Chinese traders react

Three general trends materialized in the wake of the CCP’s exchange ban:

• Dozens of Chinese blockchain start-ups began shifting to Hong Kong
• Chinese traders began shifting from domestic exchanges to P2P and OTC markets
• Chinese crypto users began shifting from WeChat to more private services like Telegram

And these trends, of course, are being done with a mind to skirt the Chinese government’s now ongoing exchange ban.

P2P Bitcoin trading grows

In the second week of September when Chinese traders started looking for new trading vectors, international OTC markets like Coincola, Bitcoinworld, and Localbitcoins became natural havens for a surge of refugee volume.

Indeed, in the first three days after China’s exchange ban went live, Localbitcoins.com alone saw volume skyrocket over 50% in the platform’s Chinese sub-market, eclipsing 32 million yuan in just 72 hours.

With these international markets falling outside of the purview of the CCP’s control, Chinese traders have only continued to migrate en masse to these platforms, no longer able to facilitate trades on centralized domestic exchanges like

WeChat, Telegram trading groups sprout up

WeChat is China’s most popular social network, but it—like most Chinese companies—lies perpetually at the mercy of Chinese regulators.

So, too, then does its users chat logs and account details.

That’s why Chinese crypto traders have also been migrating en masse from WeChat to the streamlined and privacy-minded Telegram chat app. Slack is another Western app Chinese users have been flooding too in the wake of the exchange ban.

These traders want to be able to strategize and facilitate trades without the Chinese authorities breathing down their necks, and Telegram, Slack, and similar apps make these endeavors more possible for them.

Ex-Chinese exchanges go international, launch P2P services

Dominant Chinese crypto exchange HTX (previously Huobi) is doing its part to skirt the new regulations by using the company’s P2P trading system. This system will allow Chinese traders to still deal in Bitcoins without running afoul of Chinese law—at least as it stands now.

And Okcoin moved overseas to create Okex, a P2P platform just like the HTX P2P service.

In moving abroad, Chinese companies like Okex are doing what it takes to move beyond the Chinese government’s regulatory reach while still aiming to service Chinese crypto customers.

Rumors that regulated trading is coming back

The CCP just held its 19th National Congress, and with the legislative reshuffling has also come rumors that a more lenient stance toward cryptocurrencies could be forthcoming from the Chinese government.

In the mix with this purported newfound leniency comes the announcement of a new domestic Chinese exchange, ZB.com. They declared they’d go live on Nov. 1st, but as yet their site hasn’t materialized. Have they been spooked by the regulatory situation themselves?

In the meantime, what is clear is that Chinese users will continue offline and P2P trading to circumvent the current lack of online Bitcoin exchanges in the nation.

Indeed, no amount of regulation can stop this grassroots trading—China’s just created new markets by closing old ones.