Dylan Run, a finance executive based in Shanghai, decided to venture into cryptocurrencies in early 2023 as he observed the decline of the Chinese economy and stock markets.
Despite China banning crypto trading and mining in 2021, Run used bank cards from small rural banks to purchase cryptocurrencies through unofficial channels, capping each transaction at 50,000 yuan to avoid scrutiny. Viewing Bitcoin as a safe haven akin to gold, Run shifted half of his investment portfolio, approximately 1 million yuan, into cryptocurrencies, which has since seen a 45% increase, while China’s stock market has been on a downward trend for three years.
Run is not alone; many Chinese investors are exploring unconventional ways to invest in cryptocurrencies, considering them safer than domestic options like stocks and property markets. Operating in a grey area due to the crypto ban in mainland China, investors utilize various means, such as trading on platforms like OKX and Binance, opening overseas bank accounts, or using Hong Kong’s annual forex purchase quotas for cryptocurrency investments.
This trend has caught the attention of Chinese brokers and financial institutions, facing limited growth opportunities domestically. Hong Kong’s subsidiaries of Bank of China, China Asset Management, and Harvest Fund Management are among those exploring digital asset-related businesses. Despite the ban, accessing Bitcoin in mainland China is not difficult, with online exchanges like OKX and Binance still offering services. Chainalysis reports a resurgence in crypto-related activities in China, ranking 13th globally in peer-to-peer trade volume in 2023.
The Chinese crypto market, although banned, recorded a significant transaction volume, with much of the activity occurring through over-the-counter or informal, grey market channels. Offline crypto exchange stores have appeared in Hong Kong, lightly regulated, such as Crypto HK in the Admiralty district. The underground crypto market in China is thriving, with daily volumes reaching millions of yuan. The challenging economic environment in China, marked by a crackdown on the property sector and poor performance of stocks, has led investors like Charlie Wong, a buy-side equity analyst, to turn to Bitcoin.
Wong sees Bitcoin’s disruptive potential and its endorsement by Chinese officials in Hong Kong as a strategic move to maintain a foothold in the booming crypto business globally. There is speculation that the Chinese government may be warming up to cryptocurrency, with Hong Kong serving as a testing ground for such efforts.
