As promised, China's government is monitoring OTC crypto transactions and one third is paid by Alipay

Written by || May 24 2018

Cryptocurrency control in China seems to be getting stronger since the ban on September 4th, 2017. In a bid to further limit the use of crypto in China, the National Committee of Experts on Internet Financial Security Technology (IFCERT) is now monitoring 56 platforms that offer over the counter (OTC) cryptocurrency transactions.

The IFCERT was setup in August 2016, by China's National Internet Emergency Center and the Internet Society of China with the main purpose of monitoring financial activities and analyzing economic information. This platform now also tracks OTC transactions of 72 types of cryptocurrency, across 56 platforms. Most of those platforms were set up after the banning of ICO and exchanges on September 4th, 2017 to deal with OTC trade. The IFCERT analysis platform captures details including account name, transaction value and payment methods. Nearly one third of OTC transactions were settled through Alipay, another third by domestic bank transfer, and the remainder through other 3rd party payment platforms and international transfers.


Apart from describing the monitoring platform, the report on CCTV also criticized the crypto industry for its risks, citing the case of one investor who lost over 20 million RMB (US$3.2M) and blamed OKEX for causing his loss. The report introduced views from crypto investors and government blockchain lab experts and covered topics including how mainland exchanges moved overseas and changed their products and services to avoid Chinese regulation, how exchanges make a huge amount of money from transaction fees and listing new projects, and how fraudulent projects cheat investors. The report concluded, somewhat unsurprisingly, that the industry is very messy and nontransparent.

The market panics

After the September 4th 2017 ban, most crypto exchanges and projects moved overseas but still promoted their services on the mainland. As it was defined illegal to provide trading service in mainland or to Chinese people, OTC then became most Chinese investors’ only method to invest into the area. People who believe in cryptocurrency still want to make a fortune and try to join in the game by any means. As people often need to invest through others, new scams also showed up with agents running off with crypto or money.

The report that the government had that level of detail about OTC transactions surprised most investors, which may have been part of the recent dip in market price. People were worried if there will be more strict policies, for example their accounts get locked and their investment becomes nothing.

The signal from the government, is as always, to welcome blockchain, but not tokens; yesterday a follow-up report towards blockchain showed that blockchain is recognized as a helpful tool in logistics and patent protection. The government fears the frauds in the cryptocurrency market and the risks for the industry and faces the same challenges of countries globally on how to regulate appropriately and this will likely not be the last of the government's hints that it wants to see crypto-currency out.