Some facts on LocalBitcoins rising OTC figures in China
Since the introduction of some regulatory measures by most Bitcoin exchanges in China as a way to ensure they comply to the country’s laws and not act neither as banks nor as money laundering services providers, attention seems to have shifted to the over the counter market. More individuals have seemingly taken to their respective communities to engage in P2P transactions especially with some of the minor withdrawal restrictions imposed by the major Bitcoin exchanges which are trying to upgrade their KYC/AML systems.
Top on the list of the marketplaces filling this OTC market gap is LocalBitcoins. Here are some facts that capture part of what the platform has brought to the market:
LocalBitcoins’ rise in China has been growing at an alarming rate even as it gets clearer that its operations – coin.dance shows its weekly over the counter transactions have risen above CNY36 million by the week ending February 18 – is likely unstoppable.
According to the Community Manager for the Finland-based world largest online Bitcoin marketplace, transactions on the LocalBitcoins platform in China have been done mostly using a VPN.
Max states on Reddit:
“We’re already technically blocked in China as our site uses, among other things, Google’s re-captcha system. As all Google resources are blocked in China you can’t log in to our site from mainland China unless you use a VPN.”
The response came in the wake of suggestions that some measures could originate from the Chinese government to curb the rising number of over the counter transactions. With this disclosure in mind, it is appropriate to say that OTC transactions will continue at its current pace into the future until the exchanges resume full operations.
Difference with exchanges
Some new users who are just getting to know about LocalBitcoins may stick to it though. Its business model is different from how a traditional exchange operates. It is a platform where users can set up their own exchange businesses and deal as they deem fit and convenient for their respective customers.
Under such an arrangement, an increase in a country’s Bitcoin regulation will only affect the traders and not the platform directly. Hence, it is the responsibility of each trader using the site to comply with their local legislation as they conduct trades with different types of bank to bank transfers.
LocalBitcoins’ current success in China is already attracting calls for the introduction of more marketplaces into the country particularly Bitsquare, a decentralised Bitcoin exchange which has been touted to have features that could dwarf LocalBitcoins’ operations in the future.
China still in charge
However, despite the market situation, it could still be deduced that there is a correlation between the uptake in OTC transactions in China and the global market seeing a sizable increase in the price of the top digital currency. No other major and probable factor is at hand to be considered as likely responsible for the slow uptake in the price of Bitcoin since February 18 as it climbs to its current high of $1,096. In the weeks ending February 4 and February 11, weekly OTC transactions on LocalBitcoins were at CNY1.5 million and CNY6.6 million respectively.