According to a report by Bloomberg, a study indicates that China’s cryptocurrency over-the-counter (OTC) brokers are attracting an unprecedented influx of funds, reflecting a growing demand for alternative investments amid a struggling economy characterized by weak performance in the stock and real estate markets.
Estimates by blockchain analysis firm Chainalysis suggest that, in the three quarters ending in June, the inflow of funds to Chinese cryptocurrency OTC brokers exceeded $20 billion each quarter, setting consecutive records not seen 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 having banned digital asset trading for three years due to risks associated with capital outflows and money laundering, these figures demonstrate the ongoing demand for cryptocurrencies in the country. OTC services provide a discreet method for users to exchange yuan for tokens without going through publicly listed exchanges. Another covert option allows investors to engage in peer-to-peer transactions directly.
Eric Jardine, head of cybercrime research at Chainalysis, stated, “Given China’s regulatory environment, including the bans on cryptocurrency trading and mining, these services have inadvertently fallen into the gray area of the economy.” He added that this may be attributed to the lax enforcement of the government’s cryptocurrency prohibitions.
Chainalysis reported that approximately 55% of the total funds received by Chinese OTC brokers came from transfers exceeding $1 million, but the consultancy noted that it could not determine whether these transfers originated from wealthy individuals or were transactions conducted by companies on behalf of smaller clients.
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