Customers would have “no protection” from losses incurred from cryptocurrency trading and mining, China warned last week. It outright banned domestic crypto exchanges in 2017.
But while the announcement was meant to deter crypto traders, it seems to have spurred them on.
And local authorities won’t have an easy time enforcing the crackdown. OTC desks are hard-to-trace, so tying the recent surge in transactions to particular individuals is tricky.
How to ditch yuan for crypto
Chinese netizens exchange yuan for crypto in two steps, Bloomberg explained.
Crypto traders typically use OTC desks operated by crypto exchanges like Seychelles-based Huobi and Malta-headquartered OKEx.
Once both parties agree on a price, separate middleware payment platforms send the buyer’s yuan to the crypto seller.
Chinese crypto traders know it’s almost impossible to connect the first step to the second.
Outright ban for crypto traders?
Following China’s ban on crypto mining, Huobi said it ceased selling mining rigs and related services to new users.
Huobi also promised to suspend futures contracts, exchange-traded products, and leveraged investment products.
It’s still unclear whether Huobi plans to shut down its OTC platform, Bloomberg says.
And while crypto traders in China haven’t seen an outright ban just yet, sources told the outlet authorities are looking into crypto-related money laundering and terror financing.
Unconfirmed reports of local enforcement contacting crypto traders about their transactions have also surfaced.
In one instance, authorities allegedly asked an investor to delete a trading app.