According to a report by Bloomberg, a study indicates that cryptocurrency over-the-counter (OTC) brokers in China are attracting unprecedented inflows of capital, reflecting a growing appetite for alternative investments amid a backdrop of struggling performance in the stock and real estate markets.
Estimates from blockchain analysis firm Chainalysis show that within the three quarters ending in June, the inflow of funds 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 outflows and money laundering, these figures underscore the ongoing demand for cryptocurrencies in the country. OTC services provide a discreet method for users to exchange renminbi for tokens without transacting through 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, “Given China’s regulatory environment, including bans on cryptocurrency trading and mining, these services have inadvertently fallen into a gray area of the economy.” He added that this might be due to the Chinese government’s lax enforcement of its cryptocurrency bans.
Chainalysis noted that approximately 55% of the total funds received by Chinese OTC brokers came from transfers exceeding $1 million. The consultancy further mentioned that it could not determine whether these transfers originated from wealthy individuals or from companies trading on behalf of smaller clients.
