China's Crypto Market is Thriving: Ethereum Hotel, Exchanges, and OTC Trading

The government of China and its central bank the People's Bank of China enforced a strict crypto trading ban in September 2017.

Local authorities have prohibited commercial banks from dealing with overseas crypto exchanges and OTC trading platforms, demanding financial institutions to censor transactions that are suspected to be connected to crypto-related businesses.

On Sept. 25, Ethereum Hotel, China's first hotel that accepts Ethereum as a payment method, reportedly opened their business in National Scenic Area of Four Girls Mountain.

At the time, Financial News, a publication affiliated to People's Bank of China, disclosed that ICO and crypto trading activity in China did not completely dematerialize following the official ban in September 2017.

"ICOs and virtual currency trading did not completely withdraw from China following the official ban after the closure of the domestic virtual currency exchanges, many people turned to overseas platforms to continue participating in virtual currency transactions," the report read. In fact, many sources and companies including Hong Kong and Taiwan-based digital asset exchange executive Terence Tsang stated that crypto trading in China became more popular after the ban.

According to Tsang, the ban on crypto trading by the government was only targeted at exchanges within mainland China, which pretended to be overseas companies but operated inside the country.

He emphasized that as for OTC platforms and exchanges in overseas markets like Hong Kong, the government of China has not effectively enforced strict policies to prevent trading.

It is extremely difficult for the Chinese government to outright ban all crypto trading activity in China because most traders acquire stablecoins like Tether, Gemini Dollar, and PAX to then invest in the crypto market through cryptocurrency-only exchanges.

To fully prohibit crypto trading, local financial regulators will need to censor out wire transfers from China to Hong Kong and other overseas markets, which is incredibly impractical as investors can simply create shell company savings accounts to receive funds.

Cryptocurrency trading activity in China has increased so rapidly in the past nine months to a point in which companies have started to raise millions of dollars in seed funding to provide insurance and security services to digital asset OTC trading platforms in the country.