Residents of China have started actively converting their savings into cryptocurrencies and are using creative ways to own Bitcoin (BTC) and other crypto assets banned in the country.
Although cryptocurrencies are banned in mainland China and there are strict controls on cross-border capital movements, people can still trade tokens like Bitcoin on crypto exchanges like OKX and Binance or through other over-the-counter channels, according to Reuters. In addition, investors in mainland China can also open bank accounts abroad to purchase crypto assets.
After Hong Kong openly approved digital assets last year, Chinese citizens are using their $50,000 annual foreign exchange purchase quota to transfer funds to cryptocurrency accounts in the territory.
As an executive at a Hong Kong cryptocurrency exchange who spoke on condition of anonymity explained, China's economic downturn has made investing on the mainland risky, uncertain and disappointing, prompting people to look to place assets overseas.
“Investors from the mainland come to this market almost every day.”
Anonymous senior executive of a crypto exchange in Hong Kong
In 2017, China closed its local cryptocurrency exchanges, stifling the speculative market that accounted for 90% of global Bitcoin trading. In September 2021, the Chinese government introduced a complete ban on all cryptocurrency transactions.
However, as Chainalysis experts previously said, government bans did not stop residents of mainland China from remaining active crypto users. According to them, China can use the Hong Kong market as a “testing ground for approaching cryptocurrencies.”
Thus, from July 2022 to June 2023, Hong Kong ranked fifth in the volume of cryptocurrency transactions with an indicator of around $64 billion. It ranked second behind South Korea, Japan, China and Taiwan. Analysts emphasized that Hong Kong's indicators are comparable to those of China, but the region's population accounts for 0.5% of the population of mainland China. In the management space, a large portion of the volume comes from large institutional transactions of $10 million or more.
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