Over The Counter Bitcoin Economy In China Booms Despite Warnings
Whenever a government authority decides to impose a certain regulation with some common interests in mind, people tend to find a way out for circumventing the same. And in case if the regulation is being imposed on Bitcoin which have been dazing investors for long, then it’s only a matter of time before people start finding alternative ways of using the same.
China had since the very beginning accounted for a lion’s share of the global BTC trading volume. However directives issued by Chinese government to ban bitcoin trading and ICO dealings with an aim to safeguard investors from its volatility and unregulated functioning left crypto aficionados worldwide heartbroken and the price of Bitcoin getting derailed from its growth path for some time. Coming to present day, Bitcoin and Renminbi volume in the mainland exchanges of China are virtually non-existent. However, its over-the-counter (OTC) crypto-economy had been kept bubbling lately with major happenings.
The Chinese trading volume had ranked at the top of the charts accounting for a significant share of global trading volume. Renminbi (¥ CNY) had also occupied the position of numero uno currency traded using BTC. Presently the global ranking of CNY has stumbled down to the 20th place and accounts for just 0.03% of global bitcoin trading volume. In spite of all these statistics, the Bitcoin Association of tech-columnist and HK’s founder Leonhard Weese has revealed that the Chinese exchanges are fully functional internationally in places such as Hong Kong. Weese has pointed out that BTCC, Huobi and Okcoin, three of the biggest Chinese crypto exchanges presently constitute of just 7% of the global trading volume. Huobi for example is currently trading in BTC and tether worth $194 million USD whereas Okcoin is engaging in trading of $11 million worth of BTC and BTCC is trading BTC, BCH, ETH and ETC worth $146 million. CNY has been replaced by the controversial Tether (USDT) medium of exchange in terms of worldwide trading volume. OTC trading is booming but renminbi pairs are not occurring within the region given the record low trading volume in the Chinese exchanges.
The trading volume of Chinese Localbitcoins has registered an all-time high this week outrunning the last time when the exchanges went on hiatus. Other OTC platforms have also reported a significant surge in the demand for Coincola, Richfund.pe and Poim. The three biggest Chinese crypto trading exchanges are using the shield of international borders and are being helped by these companies which apart from providing investors with substantial bitcoin orders are also contributing to its liquidity. The popular OTC dealer and bitcoin hedge fund Richfund, looks after the funding requirements of various institutions. CEO Lin Li explained in the company’s website that, “[Richfund] makes a very large contribution for depth and volume and is a strategic partner of Huobi.”
It was reported last month that the growth of such peer-to-peer markets is not much appreciated by the Chinese government. China’s Central Television (CCTV-13) had issued a warning on 11th November propagating the risks involved in OTC Bitcoin trading. Such warnings however could not stop people from engaging in underground trading via Wechat, Telegram channels and Alipay. The peer-to peer trading volume of Paxful, a similar platform has registered an all-time high off late. PBOC officials are contented about shutting down mainstream bitcoin exchanges from engaging in CNY trades although a lot of underground action is brewing in the backyard. Yicai Global, a regional news outlet has revealed that People’s Bank of China’s (PBOC) vice governor stood by the decision of the central bank to intervene China’s cryptocurrency economy. Pan Gongsheng of the central bank explained that, “If we didn’t shut bitcoin exchanges and crack down on initial coin offerings (ICOs) a few months ago, and if more than 80 percent of the world’s bitcoin transactions and financing activities were still taking place China, which was the case back in January, what would it be like today?”
Okcoin, BTCC and Huobi, the top three Chinese exchanges along with Poim, Localbitcoins, Richfund and Coincola are not the only businesses vying the market for a share of OTC customers. Several over the counter dealers such as Octagon Strategy, Gatecoin, Circle Financial and the newcomer Genesis Block have moved into the arena lately. Octagon Strategy Limited, a privately owned company specializes in providing digital asset liquidity in regard to Cryptocurrencies such as bitcoin and ethereum. Gatecoin, the Hong Kong-based cryptocurrency exchange has been receiving a lot of attention following the Chinese exchange magnets ceasing their operations. Founded back in 2013, the Gatecoin platform looks after large market makers and retail investors. Another Hong-Kong based company Genesis block has imparted the much needed stimulus to jumpstart the Bitcoin Cash network. Such OTC-centric companies have set a minimum limit on the number of bitcoin purchase required which ranges nothing less than $100,000 to $10Mn on a per order basis. Circle Financial had previously created ‘Circle China’, its Beijing-based subsidiary for strengthening its strategic hold in the region back in June 2016. ‘Circle Trade’ its liquidity services arm is doing exceptionally well by dedicating its resources exclusively to OTC markets in this area.
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Tarunima Ghosh Laha
Tarunima Ghosh Laha is a Finance Post Grad from St. Xaviers who believes Finance is more than just Balance Sheets and Ledger creation. This filmy bookworm who believes she was a sloth in past life also nourishes a penchant of owning a private zoo someday. Equipped with a laptop and online Lexicon she is all set to give finance a glamorous makeover in the form of exciting writeups with bang on info and flashy new words.