Chinese Citizens Still Invest in Bitcoin and the Cryptocurrency Market Despite Heavy Government Repression

] Huobi and OKCoin have been ordered by the government to close their businesses. At one point, the leaders of the three cryptocurrency exchanges were prevented from leaving the country, due to a government investigation into local cryptocurrency exchanges.

Three months later, in December 2017, the three largest Chinese cryptocurrency exchanges in Hong Kong. BTCC China, Huobi and OKCoin have been renamed BTCC, Huobi Pro and OKEx respectively. They intended to meet the rapidly growing demand from Hong Kong-based investors.

Shortly after their move, the three trading platforms began to see the daily volumes of Chinese investors grow exponentially. In a way, Chinese investors were able to circumvent China's trade restrictions by using Hong Kong-based stock exchanges. How is it possible?

In Hong Kong, it is relatively easy for investors to start businesses. With less than $ 1,000, businesses can be legally created, allowing the opening of business bank accounts in Hong Kong-based financial institutions. As of December 2017, many Chinese investors transferred their funds from their Chinese bank accounts to Hong Kong bank accounts and began to more actively trade cryptocurrencies, thereby circumventing restrictions imposed by China

. decline in supply to meet growing demand. While China is home to major miners like Bitmain, Hong Kong does not produce a lot of Bitcoin and other crypto-currencies. As such, premiums on Hong Kong's cryptocurrency market have increased, surpassing even those in the South Korean market. On January 18, when the average Bitcoin global price was about $ 11,500, Bitcoin was trading at over $ 13,000 on Huobi Pro.

Krystal Hu, a Hong Kong financial reporter, noted that traders out of China also began to take advantage of 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 from Coinbase and selling it on a Hong Kong-based market would have generated a profit of $ 1,200

The Chinese Government Concerned

The Hong Kong Stock Exchanges have also integrated fintech applications widely used in China. like Alipay and WeChat Pay from Tencent. Alipay is a $ 60 billion fintech application that is used by over 50% of mobile users. WeChat Pay, which was only used by 7% of mobile users in 2014, is now used by more than 40% of China's mobile users.

The integration of two fintech payment networks has increased the accessibility of Hong Kong Cryptocurrency OTC exchange for Chinese investors, thus facilitating the process of investment in the market of Cryptocurrency

To prevent Chinese investors from buying digital currencies, the Chinese government and the People's Bank of China (PBoC) have asked local banks to disclose any suspicious transaction related to markets based on in Hong Kong. However, even this action will not be able to prevent Chinese investors from accessing Hong Kong based markets, due to applications such as Alipay and WeChat Pay.