The Chinese government has been tough on bitcoin — it banned initial coin offerings (ICOs) and shut down local bitcoin exchanges last September, and now it’s looking into cracking down on local bitcoin mining pools.

Despite all this, investors in China are still finding ways to join the cryptocurrency craze. They’re just paying a higher price for the privilege.

View photos Even the Chinese government can’t stop people from using yuan to buy bitcoin. (Getty) More

Chinese buyers are turning to over-the-counter (OTC) trading platforms like Huobi, OKEx and OTCBTC, networks that link individual buyers to sellers. On these sites, buying cryptocurrencies is like shopping on Ebay: choose the coin you want, then offers from multiple sellers appear. Buyers can link their bank accounts or use popular mobile payment methods like Alibaba’s Alipay or Tencent’s WeChat Pay. Once they get their hands on the coins, investors can trade them on any exchange in the world.

There’s just one caveat: prices on these OTC platforms are typically 10% to 20% higher than the prices on most other exchanges. On Jan. 18, when bitcoin (BTC-USD) was trading at $11,730 on Coinbase, the biggest U.S. brokerage, the lowest price on the Huobi OTC platform was 84,000 yuan, or $13,085.

The premium that Chinese investors pay is a direct result of the limited OTC coin supply caused by government regulations. For more sophisticated folks, there’s an arbitrage opportunity: Traders will buy cryptocurrencies cheaply on foreign exchanges and immediately sell on domestic OTC platforms at a higher price. But there are risks, including price volatility, slow transaction times and China’s strict control on capital outflows.

OTC market is booming under regulatory shade

View photos This chart shows the recent jump in transactions on OTCBTC, a major OTC cryptocurrency trading platform for Chinese users. (OTCBTC) More

After China’s ban on local bitcoin exchanges in October, some platforms survived by incorporating in overseas locations like Hong Kong, Taiwan and Singapore. Huobi and OKEx, which are among the largest exchanges in the world and were included in the ban, soon opened OTC platforms besides its exchange and promoted OTC transactions by waiving transaction fees.

While it’s hard to measure the exact size of OTC trading across all platforms, one single seller at Huobi recorded more than 10,000 separate bitcoin transactions in the past month. Another Taiwan-based platform, OTCBTC, which now offers more than 40 cryptocurrencies, boasted $100 million in transactions in the first 50 days after it launched last October.

However, concerns about regulatory risks aren’t going away either. Huobi, for example, marks the reminder in red that buyers should not mention sensitive words like “BTC” or “bitcoin” in their bank transfers in order to reduce the likelihood of having the transaction blocked.

View photos A message to customers on Huobi. The line in red says: Note: buyers should only put the order reference in the note for money transfer. To avoid your transfer from getting delayed, please don’t mention BTC, bitcoin or any other characters related to cryptocurrencies. More

And even though it’s still possible to buy bitcoin in the country, China may never reclaim its title as the top market for cryptocurrency trading. Huobi saw a huge drop in its active users after last year’s ban. In the time since, Japan has become the No. 1 market by exchange activity volume.