Chinese citizens are still investing in Bitcoin and other crypto-currencies, despite tough measures and repression by the government.
In September 2017, the Chinese crypto exchange BTCC China, Huobi, and OKCoin were forced to cease their operations in China under the order of the government. During the government investigation, the heads of these exchanges were even banned from leaving the country.
Three months later, in December 2017, the world’s three largest crypto-exchange exchanges moved their business to Hong Kong. BTCC China, Huobi, and OKCoin were renamed to BTCC, Huobi Pro, and OKEx, respectively. They intended to meet the rapidly growing demand from investors from Hong Kong.
Soon after the “move,” it became apparent that on these three trading platforms the daily volumes from Chinese investors grow exponentially. Anyway, Chinese investors managed to circumvent government restrictions, using exchanges in Hong Kong. How was this possible?
To open an account with Hong Kong financial institutions, investors need to set up their own company. The price of legal registration is about 1000 US dollars.
Chinese investors have done just that, and since December 2017, most of them have begun to transfer their funds to bank accounts in Hong Kong. This allowed them to actively trade in crypto-currencies, bypassing the ban of the Chinese government.
China is home to major miners such as Bitman, while in Hong Kong there is not a lot of bitcoins and other crypto currencies. Thus, prices for the Hong Kong crypto-currency market increased, exceeding even the South Korean market. On January 18, when the average Bitcoin cost around $ 11,500, Huobi Pro traded at more than $ 13,000.
Traders outside of China quickly began using the arbitrage opportunity presented by the Hong Kong market. For example, on January 18, the price of Bitcoin on Coinbase was $ 11,800. Buying Bitcoin on Coinbase and selling it on any Hong Kong stock exchange would bring a profit of $ 1,200.
The Hong Kong stock exchanges also integrated widely used FinTech applications in China, such as Alipay and Tencent’s WeChat Pay. Alipay is an application with a turnover of 60 billion dollars, which is used by 50% of mobile users. WeChat Pay, which in 2014 only 7% of mobile users used, now use more than 40%.
The integration of these two FinTech applications made it easier for Chinese investors to invest in the crypto-currency market.
The Chinese government and the People’s Bank of China, in order to stop Chinese investors from buying crypto-currencies, called on local banks to disclose any suspicious transactions related to the markets of Hong Kong. However, even this step will not prevent Chinese investors from gaining access to the markets in Hong Kong, thanks to such applications as Alipay and WeChat Pay.