How Chinese bitcoin consumers are fighting with the governmental ban

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2018-01-20
How Chinese bitcoin consumers are fighting with the governmental ban

The Chinese government has been playing hard on bitcoin — it prohibited ICOs and stopped all the native bitcoin exchanges from working last Sep. Currently, it wants to close all the local bitcoin mining pools.

Nevertheless, investors in China still find paths to build and evolve the cryptocurrency community. But the price they pay for this privilege is rather high.

Chinese consumers flipped to over-the-counter (OTC) trading platforms like Huobi, OKEx, and OTCBTC.  These platforms link individual consumers to sellers. Do you shop on Ebay or Amazon? Well, using these websites is absolutely the same. You just search for the currency you want and choose from a variety of sellers.  People link their bank accounts or use standard mobile payment strategies like Alibaba’s Alipay or Tencent’s WeChat Pay. When they get the coin, they can trade it all over the world.

Everything seems perfect and smooth, doesn’t it? There’s just one tiny drawback: you have to overpay 10-20% in comparison with other exchange platforms. For example, on the 18th of January, BTC’s price was $11,730 on Coinbase. But on Huobi, the over-the-counter platform, the lowest price was $13,085. Quite a difference, huh?

You see, the OTC coin supply is rather limited. This is the result of the governmental prohibitions. There’s another way – an arbitrage opportunity: Traders can get cryptocurrencies for a cheap price on external exchanges and instantly sell on local over-the-counter platforms, but for a higher price. But this method is rather risky. Taking into the consideration the unpredictability of the price, time-worthy transactions and China’s strict regulations on capital outflows, you can engage yourself in great troubles.

OTCBTC transactions activity

This graph demonstrates the growth of the transactions activities on OTCBTC.

Hong Kong Taiwan, Singapore became the places where companies integrated after the bitcoin being banned in October.  Huobi and OKEx, one of the most influential exchanges on the planet were also banned, found a solution in opening OTC platforms in addition to the exchanges. They promoted their OTC transactions via canceling the transactions fees.

Due to the huge usage of OTC platforms, it’s nearly impossible to calculate the exact amount of trading going on, but  a seller from Huobi submitted the info that past month over 10,000 separate bitcoin transactions took place. OTCBTC, a Taiwan based platform, that now have more than 40 cryptocurrencies to offer, stated that it had $100 million in transactions within the 1st fifty days after it launched last October.

However, issues concerning restrictive risks aren’t disappearing either. Huobi, for instance, warns its consumers not to mention keywords words like “BTC” or “bitcoin” in their bank transfers to decrease a chance of their transactions being blocked.

Huobi warning to its users

In the sentence written in red, you can see the Huobi’s warning to its users not to mention any cryptocurrency related words in their notes for transfers.

China’s active crypto banning position caused a huge drop even on the OTC platforms. Now, Japan became a leader in the exchange activity amount.

 

CRYPTOCURRENCIES
  • bitcoinBitcoin$3,949.21
  • ethereumEthereum$146.39
  • rippleXRP$0.326126
  • tetherTether$1.00
  • eosEOS$3.82
  • stellarStellar$0.089045
  • litecoinLitecoin$50.80
  • cardanoCardano$0.046917
  • tronTRON$0.024831
  • moneroMonero$49.92
  • iotaIOTA$0.309852
  • nemNEM$0.043397
  • dashDash$86.77
  • neoNEO$9.05
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