It’s been nearly two months since Chinese cryptocurrency exchanges were abruptly shuttered by local regulators, part of President Xi Jinping’s ongoing crackdown on capital outflows and potentially embarrassing or destabilizing market forces in the weeks ahead of last month’s National Party Congress. But now that China's new
president emperor has cemented his grip on power by installing political allies on the Politburo and successfully lobbying to have his name enshrined in China’s Constitution, the exchanges are taking tenative steps to figure out if it’s safe to do business in China again, and what constraints would apply to their operations going forward.
And while providing an online exchange for fiat-to-digital currency transactions is still expressly prohibited, a couple of the country’s biggest exchanges are rolling out an OTC model that resembles the popular peer-to-peer bitcoin trading website Local Bitcoins, and which will "also support fiat currency transactions."
Some of China's top bitcoin exchanges are now shifting to the over-the-counter (OTC) market in the wake of a crackdown by regulators in the country. In announcements made on Oct. 31, both OKEx and Huobi Pro said they will introduce peer-to-peer trading platforms that support fiat currency transactions, including the Chinese yuan, as an alternative for the country's domestic cryptocurrency investors.
Based in Hong Kong, the two exchanges had previously provided solely crypto-to-crypto trading since being founded by their respective parent exchanges, Beijing-headquartered OKCoin and Huobi. They will now pivot toward a combination of the existing structure and the direct, peer-to-peer model.
The news confirms what most have already known: that Chinese demand to trade, or rather buy, cryptocurrencies is still as strong as ever, if not more. According to OKEx, the yuan is currently the only fiat currency that is available on its P2P platform; it also adds that it has seen increasing demand from Chinese crypto investors since the exchange crackdown.
Lennix Lai, financial market director at OKEx, said the platform has received around 8,000 user applications for account registration since the new service's launch on Nov. 1.
Lin Li, CEO of Huobi, said in his latest announcement that, besides the P2P platform on Huobi Pro, the company is also eyeing an expansion to overseas markets. The firm is currently in the process of setting up an exchange platform in South Korea to compete with local marketplaces like Bithumb.
The news that China may be returning to crypto trading comes as bitcoin rallied to $7,500 last week , news record highs in recent days, spurred by CME Group’s decision to launch bitcoin futures trading, which in turn resulted in a record 100,000 new users joining America's largest crypto exchange, CoinBase.
The business model pivot comes as much of China’s trading volume has migrated to nearby Hong Kong and South Korea in the weeks since the shutdown. Whether they will be able to lure most, or some, of it back to the mainland under the watchful eye of Chinese authorities remains to be seen. Meanwhile, after dominating bitcoin trading volumes as recently as one year agom China has become a non-factor in recent months for obvious reasons, with Japan and South Korea emerging as China's preferred trading proxies for both Bitcoin and Ethereum.