Chinese regulators fail to slow Bitcoin’s tremendous growth

China was the first country to ban Initial Coin Offerings (ICOs) and Bitcoin trade within the country this past September. At the time, the ban was seen as a major setback to Bitcoin’s growth, as more than half of the coin’s miners were located in China. The ban did contribute to the coin’s value dropping from $5,000 to approximately $3,000, but later it became obvious that was all the difference it was going to make.

Despite the shut down of exchanges, Chinese investors continued trading Bitcoin and investing in ICOs. Investors simply switched to peer-to-peer trading, thus eliminating the need for an exchange’s involvement. According to a report by National Committee of Experts and Internet Financial Security, the renminbi share of over-the-counter Bitcoin trading increased from 5% to 20% just a month after the ban.

John Riggins, head of Asia operations for BTC Media, stated that the shut-down of Chinese exchanges did not prove to be a hurdle in Chinese investors’ path to investment but instead caused them to switch to the OTC market. “The situation with China’s exchanges has pushed more of its trading over the counter, where there is a fairly robust and liquid market,” Riggings said.

Chinese investors are making use of messaging apps to communicate and negotiate peer-to-peer trades. Tencent’s mobile messaging app, WeChat, was first being used for this purpose but then security-related concerns caused investors switch to the encrypted platform, Telegram, to make OTC Bitcoin transactions.

China’s OTC market, however, is not advanced enough to allow the sale of new Bitcoins, worth hundreds of thousands of dollars each day. The ban is thus proving to be especially challenging for Chinese investors who had moved to the country’s areas with cheap electricity to power their giant mining rigs – especially Gansu and Mongolia “hinterlands”. According to some reports, 80% of Bitcoins were being mined in these areas at the time of the Chinese crackdown.

Investors seeking to invest in ICOs can still do so on a foreign platform. However, many of these platforms have now deleted the Chinese-language versions of their websites or have reinforced their know-your-client requirements, making it much harder for Chinese investors already owning Bitcoin or other Cryptocurrencies to participate. “There are a lot of questions about the future of the Chinese miners, given that they still need to pay for staff and operations in renminbi,” said Thomas Glucksman, head of marketing for Gatecoin, a bitcoin exchange and ICO underwriter in Hong Kong.