In the volatile world of finance, cryptocurrencies have become a beacon for Chinese investors seeking refuge from their country’s faltering stock market. Among them is Dylan Run, a finance executive from Shanghai, who began diversifying his investments into digital currencies early in 2023 amidst growing concerns about China’s economic and stock market instability.

Despite China’s 2021 ban on crypto trading and mining, Run and many like him have found ingenious methods to navigate these restrictions. Utilizing bank cards from smaller rural banks, Run engaged in cryptocurrency transactions with grey-market dealers, carefully keeping each transaction under 50,000 yuan (approximately $6,978) to avoid attracting regulatory attention.

“Bitcoin is the new gold,” asserts Run, who now has half of his investment portfolio in cryptocurrencies, valued at about 1 million yuan. This shift comes as China’s stock market continues its three-year decline, while Run’s crypto investments have surged by 45%.

The allure of cryptocurrencies like Bitcoin has intensified among Chinese investors seeking alternatives to the volatile stock and property markets. Despite the official ban, many continue to trade through platforms like OKX and Binance or via over-the-counter channels, operating in a regulatory grey area.

The crypto frenzy has even reached Hong Kong, where Chinese citizens are leveraging their $50,000 annual foreign exchange quotas to invest in digital assets, following the city’s favorable stance towards cryptocurrencies last year. This move aligns with a broader strategy to diversify investments offshore amid the mainland’s economic uncertainties.

The sentiment is echoed by a senior executive from a Hong Kong-based cryptocurrency exchange, who chose to remain anonymous due to the sensitivity of the matter. “The mainland’s economic downturn has driven investors to look offshore, making cryptocurrencies an attractive option,” he noted, highlighting the steady influx of mainland investors into the crypto market.

This trend isn’t limited to retail investors; financial institutions and brokerages, starved of growth opportunities in China, are increasingly exploring crypto-related ventures in Hong Kong. Entities like the Bank of China’s Hong Kong subsidiaries and other asset management firms are delving into digital asset businesses, seeking new growth narratives.

Despite the official ban, accessing cryptocurrencies in mainland China remains relatively straightforward, with exchanges like OKX and Binance covertly serving Chinese investors. These platforms facilitate transactions through fintech services like Alipay and WeChat Pay, allowing yuan-to-crypto conversions with stablecoins.

Crypto activity in China has seen a resurgence, with the country climbing to 13th place globally in peer-to-peer trade volume in 2023, a significant leap from its 144th position in 2022, according to Chainalysis. The estimated $86.4 billion transaction volume between July 2022 and June 2023 surpasses Hong Kong’s $64 billion, underscoring the robust underground crypto market in China.

As traditional investments wane under economic pressures, cryptocurrencies offer a volatile yet potentially rewarding alternative. With Hong Kong serving as a quasi-test bed for crypto trading, speculation mounts that the Chinese government might be softening its stance on digital currencies, eyeing the booming crypto markets in global financial hubs.