Despite China’s ban on cryptocurrency, the gray market for cryptocurrency is thriving in the Middle Kingdom. One study from Chainalysis shows that a a total of $75.4 billion in inflows were recorded by over-the-counter Chinese crypto traders in a recent 9-month period.

China banned crypto in 2021 due to concerns over capital flight and financial risks for investors, but digital assets remain popular, with underground channels for crypto activity soaring through over-the-counter (OTC) trades and peer-to-peer trading. China is currently ranked 20th on Chainalysis’ annual Global Crypto Adoption ranking, indicating a sizable segment of the population continues to trade despite the ban.

While Beijing has regularly cracked down on violators flouting its proscription against digital assets, loose enforcement action may be catalyzing the recent growth. More than half of the total value from Chinese over-the-counter trades are from users transferring over $1 million, Chainalysis said.

In April, the special administrative territory of Hong Kong, which ostensibly maintains a separate political and economic system from Beijing, approved spot bitcoin exchange-traded funds (ETFs) for the first time. The jurisdiction is vying to transform into a crypto hub on par with global rivals Dubai and Singapore, which have both attracted large numbers of crypto firms in recent years.

Over the past year, Hong Kong has also seen a meteoric growth in crypto adoption – the largest in the region, according to Chainlysis – recording an 85.6% increase. With recent headwinds impacting China’s real estate market and economy, an increasing number of mainland Chinese investors are also looking at Hong Kong as a potential gateway to crypto exposure, but it’s not clear yet how regulators at home may respond.