China: Crypto traders turn to OTC platforms amidst Bitcoin crackdown
As the Bitcoin frenzy has subsided, some of the Chinese traders who profited from the cryptocurrency craze are looking for another way to carry out their business. These individuals are trading in so-called crypto-forex, or cryptocurrency derivatives, as the Chinese government continues to crack down on the cryptocurrency market.
The Chinese government has a long history of banning cryptocurrency exchanges, and they have been adding exchanges at a rapidly increasing rate over the past year.
China has been cracking down on digital currency trading, prohibiting the trading of cryptocurrencies such as Bitcoin in China. The country’s central bank forbid financial institutions from dealing in cryptocurrencies and forced local cryptocurrency exchanges to shut down. However, while the major exchanges have closed, traders still turn to the over-the-counter (OTC) to turn their digital currencies into real money.
Billionaires in China are turning to over-the-counter services to trade and buy bitcoin and other cryptocurrencies, even as the local government says it plans to impose restrictions on the sector, business publication Bloomberg reported today.
Exchange rate increase
Earlier this month, officials in the country said they would continue and halt mining activities in the country. We will crack down on bitcoin mining and the behavior of traders, Vice Premier Liu He and the State Council said, citing climate concerns. As a result of these comments, prices have fallen by more than 40% across the cryptocurrency market. But while sellers are de-risking, others are buying more cryptocurrencies through over-the-counter platforms. OTC platforms are simply an exchange platform for assets that are not listed on a formal exchange or traded through a closed book. These platforms allow wealthy traders or investors (they typically have higher standards for users) to invest in the markets in a more private way. And business is good. The report said the rise in the exchange rate between the Chinese yuan and Tether stablcoin, which fell 4.4 percent earlier this month, has recovered to half its value before the restrictions were imposed, suggesting OTC platforms are doing good business. OKEx, one of China’s largest exchanges, said China would take stricter action against exchanges and mining activities, but that people can still use and own cryptocurrencies in general, including Chinese citizens. https://t.co/PAxK2gs4vp – Wu Blockchain (@WuBlockchain) May 31, 2021
OTC betting on cryptocurrencies
You can see how they are implemented here: Companies like Huobi and OKEx, two popular crypto exchanges that use their OTC platform in China, allow traders to place bids and offers, with the exchange itself acting as the counterparty. Once the price is agreed (it may be higher or lower than the world market price), the buyer (or seller) uses another payment platform to send the RMB, which is then held in an escrow account until payment is made. The crypto currency is then transferred to the buyer’s account and the transaction is complete. This allows users to exchange privately. She says regulators currently have no way of determining exactly which transaction on a local payment platform corresponds to which transaction on a cryptocurrency exchange. However, this does not mean that everyone is safe. Earlier this month, for example, Chinese regulators reminded banks and payment companies of their obligation to detect and block suspicious transactions. B. those related to money laundering or crypto currency transactions. On the other hand, individual trade has not yet been completely banned by the Chinese government.
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Last week, China’s central bank issued a document outlining regulatory policy on digital currencies. The document demanded that the local crypto exchanges stop accepting new registrations, close all trading accounts and stop providing crypto-to-crypto trading services by the end of the year. In addition, the exchange platforms could not offer margin trading, lending or other forms of financial products.. Read more about ethereum and bitcoin projections and let us know what you think.
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