According to a report by Bloomberg, a study indicates that China’s cryptocurrency over-the-counter (OTC) brokers are attracting unprecedented inflows of funds, reflecting a growing appetite for alternative investments amid a struggling economy marked by weak performance in the stock and real estate markets.
Estimates from blockchain analysis firm Chainalysis reveal that in the three quarters leading up to June, inflows to Chinese cryptocurrency OTC brokers exceeded $20 billion each quarter, setting a continuous record since 2021, with a cumulative total of $75.4 billion over these nine months.
Surge in inflows to Chinese cryptocurrency OTC brokers (Image source: Bloomberg, Data source: Chainalysis)
Despite the Chinese government’s three-year ban on digital asset trading due to risks related to capital outflow and money laundering, these figures demonstrate the sustained demand for cryptocurrencies in the country. OTC services provide a discreet method for users to exchange renminbi for tokens without transacting on public order books. Another discreet option allows investors to engage in direct peer-to-peer transactions.
Eric Jardine, head of cybercrime research at Chainalysis, stated, “Considering China’s regulatory environment, including the bans on cryptocurrency trading and mining, these services have inadvertently fallen into a gray area of the economy.” He added that this may be due to the Chinese government’s relatively lax enforcement of the cryptocurrency ban.
Chainalysis noted that approximately 55% of the total funds received by Chinese OTC brokers came from transfers exceeding $1 million. The consulting firm also mentioned that this data does not clarify whether these transfers originated from wealthy individuals or businesses trading on behalf of smaller clients.