China’s central bank has stepped up oversight of bitcoin exchanges this year, leading major trading platforms to impose halts on withdrawals and other checks to appease the regulator. But Chinese traders aren’t playing along—they are apparently flocking to peer-to-peer marketplaces to continue buying and selling bitcoin.
One of the longest established peer-to-peer marketplaces is LocalBitcoins, which acts as a kind of directory for buyers and sellers to find each other. Users can arrange to meet in person, on chat platforms, or talk on the phone to arrange exchanges involving bitcoin.
Yuan volumes on the marketplace have exploded in the past week. Trading on LocalBitcoins currently accounts for about 6% of the total trading volume in yuan, according to data source Crypto Compare.
Here’s how LocalBitcoins works: Users need not use the platform every time they make a trade. After an initial contact with a buyer or seller, a user can just get in touch directly the next time they want to deal with that person.
That means volumes on LocalBitcoins may undercount the value of transactions that the platform facilitates. Additionally, there’s plenty of peer-to-peer trading going on in WeChat chatrooms and other informal marketplaces where volumes aren’t captured.
Yuan trading on bitcoin exchanges has plummeted, though the picture is muddied by the fact that Chinese exchanges used to let users place trades for free, leading to an inflated number of trades. That practice is now being adopted by platforms in Japan, and yen trades currently dominate global volume.
The bitcoin price has regained the ground it lost after the Chinese central bank’s initial clampdown, suggesting that volumes may have returned to normal. The cryptocurrency is currently valued at more than double its price a year ago.