Cryptocurrency in China: Over the Counter, Under the Table

There remains a great deal of confusion surrounding the legal status of cryptocurrency in China.

China has been progressively restricting more aspects of cryptocurrency within its borders dating back to September 2017, when it began by banning ICOs because of the financial risk and frequent fraud.

The actual handling of cryptocurrency in mainland China in practice doesn't reflect the letter of the law, however.

It's no secret that Chinese citizens remain deeply involved in cryptocurrency mining, trading, and ICOs/IEOs.

While official figures say that the percentage of cryptocurrency trading attributable to the yuan has dropped from 90% to 1% in the wake of the 2017 regulation, this does not account for over-the-counter trading which is where most fiat to crypto volume in China has shifted to since the regulation.

Payment can be handled between two parties once they have agreed on a trade through WeChat, Alipay, or banking wire, though China is attempting to crack down on that as well by blocking mobile payment platforms from processing crypto related payments.

There are thousands of similar WeChat OTC groups operating at a small scale, but together add up to a significant amount of crypto trading volume originating from China that is not accounted for by official figures.

If one has the desire, buying cryptocurrency in China is by no means difficult.

China took to using Tether as a substitute to yuan in trading pairs.

This is one possible explanation for why Tether has been so resilient to negative press such as the Tether-Bitfinex $850 million cover-up and over 60% of newly issued Tether is traded in Chinese background exchanges -it is supported by the crucial role it plays in the huge amount of crypto trading that depends on it in China.