There seems to be a correlation between the series of regulatory adjustments made by some Bitcoin exchanges in China and the sudden rise in the number of over the counter transactions on the world’s largest OTC trading platform for local traders, LocalBitcoins.

Since the Chinese exchanges’ Bitcoin withdrawal suspension took shape to allow for some regulatory measures upgrade their anti-money laundry system, its trading volume through alternative means, particularly LocalBitcoins, has grown rapidly in China.

According to coin.dance which provides community-driven Bitcoin statistics and services, weekly LocalBitcoins trading volume in Chinese yuan has spiked to almost CNY6.6 million since the week starting February 11. This is a huge leap from the previous week (February 4) when the weekly volume topped at about CNY1.5 million. It is also an all time high record for OTC transactions in China using LocalBitcoins.

This follows Huobi and Okcoin’s first announcement that they will be suspending their Bitcoin and Litecoin withdrawal services which would last for a month or less. BTCC followed with a similar announcement. Updated information now show that another Bitcoin exchange in China, Yunbi, has increased its platform’s trading fee by 0.2% while CHBTC has suspended the withdrawal of Ethereum and Ethereum Classic in addition to its policy that already applies to Bitcoin and Litecoin and HaoBTC about to remove its exchange functions to focus on its main services of mining and providing an online wallet.

These adjustments for regulatory purposes have raised the discussion that border on unregulated markets and how they are not likely to be free of any form of manipulation. This is based on the argument that an regulated exchange will have no restrictions on manipulation taking place hence it will continue to happen until proper regulatory measures are in place.

While the news of these new developments hit the market, some are of the view that having fewer centralized exchanges can only be a good thing for the market as a whole. Someone tweeted that higher compliance costs will likely drive many small players out but the exchange consolidation is coming in China.

In a way, it is sinking that it would be simpler for China to ban Bitcoin but the country is instead trying to make Bitcoin compliant with its law which, in the end, would be a complement to the market as it has been relatively stable than before. The adoption of these set of regulatory policies will enhance detailed anti-corruption due diligence information sharing and stem money laundering.

A Brazilian solo Bitcoin broker who deals with exotic clients in China had earlier hinted that now is the best time for over the counter transactions in China in a chat with 8btc on the current market situation.

Allex Ferreira told 8btc in a tweet chat that though the market is still going well despite the regulatory measures being put in place, time will tell if the Chinese (market) volume will show some signs of recovery in the next few months when all what is happening now would have been over.

In the meantime, he says via Twitter:
“With the exchanges in trouble with the PoBC, the collateral effect will be the rise of OTC transactions. It will last for some time because non-Chinese nationals cannot deposit neither withdraw from Chinese exchanges.”

Though no regulatory measures have been mentioned by LocalBitcoins, BitKan, a similar Bitcoin-focused data and trading services provider based in Beijing, has introduced some measures that may affect new customers seeking to conduct OTC transactions.