China's crackdown on cryptocurrencies has sent mainland investors and token founders scrambling for alternatives. Traders are buying and selling bitcoin among themselves while founders of crypto proje
China's crackdown on cryptocurrencies has sent mainland investors and token founders scrambling for alternatives. Traders are buying and selling bitcoin among themselves while founders of crypto projects have turned to Hong Kong exchanges to list their tokens.
Gatecoin, a Hong Kong-based cryptocurrency exchange, experienced a surge in mainland Chinese client registrations. Aurelien Menant, the exchange's founder and CEO, told the South China Morning Post: "We have received a high number of inquiries from blockchain project founders based on the mainland who would like to list their tokens on our exchange." Leonhard Weese, president of the Bitcoin Association of Hong Kong, believes continued Chinese restrictions would redirect business to the city.
The government banned ICOs this month, eliminating a funding method that had grown in popularity throughout 2017. In its first seven months, the Beijing Internet Finance Association recorded 65 completed ICO projects that raised about $398 million. China's central bank disputed those figures, claiming that 90% of mainland-launched ICOs were fraudulent.
The government next banned channels for buying and selling digital assets. Major platforms including BTC China, Huobi and OKCoin announced they would cease trading by month's end. Yicai Global, a domestic financial publication, reported that Beijing intended to close all bitcoin exchanges. The steps represented the harshest government action against bitcoin to that point.
The crackdown extended to events. BitKan postponed its Blockchain Global Summit scheduled for Beijing and relocated it to Hong Kong. BitKan held the two-day event at the Hong Kong Grand Hyatt Hotel. The company feared that Beijing's regulatory environment posed cancellation risks. "The event team at BitKan carefully balanced the pros and cons of the risks of Beijing's city security updates and the ICO supervision from the central bank," the company stated on its website. "Though we have reported to the local enforcement and there will be no ICO related contents on the summit, we decided to change the time and location of the summit to lower the risks of being cancelled."
Leon Liu, BitKan's co-founder and CEO, said Chinese investors found ways to trade cryptocurrency outside official channels. Many conduct transactions through messaging apps like WeChat. "You use WeChat, you meet someone, you chat, you buy and sell, you transfer money, nobody knows why you transferred the money. This is everywhere now," Liu told the Wall Street Journal.
China's share of global bitcoin trading has shrunk. The country once dominated the market. Today it accounts for less than 5%. Exchanges in Japan, South Korea, the United States and Hong Kong now handle the bulk of global cryptocurrency trading.
Aurelien Menant observed this geographic shift. "Exchanges in Japan, Korea, the US and Hong Kong now dominate global crypto-token trading activities after the first major restrictions were imposed on Chinese exchanges in January," he said. "Most major token sales and blockchain development has happened and is happening outside of China, and major mining operations in Russia, Europe and the US have emerged to challenge their Chinese peers."
Menant argued that the long-term impact would remain limited. "Therefore, this will have little impact in the longer term future of the cryptocurrency and blockchain token ecosystem," he said.
Bitcoin's price showed a different picture. The digital currency has fallen 33% since the start of September.
