Chinese investors are paying little heed to the government’s biggest crackdown on cryptocurrency trading since 2017, underscoring the challenge for Beijing as it tries to rein in a speculative boom in digital assets.
Knee-jerk selling has given way to a steady recovery on over-the-counter platforms that Chinese crypto traders have used since domestic exchanges were banned in 2017. One key gauge of local sentiment — the exchange rate between China’s yuan and the stablecoin Tether — fell as much as 4.4% after the government’s warning earlier this month but has since recouped more than half the loss, according to crypto data platform Feixiaohao, a Chinese equivalent of CoinMarketCap.
China escalated its crackdown after a frenzied surge in Bitcoin and other tokens over the past six months heightened longstanding Communist Party concerns about the potential for fraud, money laundering and trading losses by individual investors. Yet the hard-to-trace nature of transactions on local OTC platforms and peer-to-peer networks means it will be extremely difficult for authorities to enforce a wholesale ban.
That may come as a relief to global crypto enthusiasts after worries about a plunge in Chinese buying power contributed to the nearly $1 trillion selloff in digital assets from record highs in mid-May.
As to the losses and the crackdown, “I don’t care,” said Charles, a 35-year-old real estate consultant in Shanghai who asked to be identified only by his English first name. He’s been buying cryptocurrencies since 2017 and claims to have lost $11 million over three days in the recent pullback. “To me it’s giving back the profits I made in the past few months,” he said. “I’m looking at the 10- to 20-year horizon.”
Before China outlawed crypto exchanges in 2017, local investors owned an estimated 7% of the world’s Bitcoin and accounted for about 80% of trading, according to state media. The exchange ban has made it impossible to gauge those figures today, but Chinese investors are still widely believed to have a major presence in the crypto world via domestic OTC platforms and offshore venues that they access using virtual private networks.
Domestic trades involving yuan and digital coins are difficult for China’s government to track because they typically take place in two separate steps.