(Bloomberg) -- China’s over-the-counter cryptocurrency brokers are attracting unprecedented inflows, a study shows, reflecting a hunger for alternative investments amid weak equity and property markets in a struggling economy.

The inflows topped $20 billion in each of the three quarters through June — a record streak in data going back to 2021 — for a cumulative total of $75.4 billion over the nine-month span, according to estimates from Chainalysis Inc.

The figures add to evidence of ongoing Chinese crypto demand despite Beijing’s three-year-old ban on digital-asset trading over risks such as currency outflows and money laundering. OTC services offer a discreet method of swapping yuan for tokens without transacting on an exchange with a public orderbook. Another secretive option is peer-to-peer trading where investors transact directly.

“Given the regulatory context in China, including the ban on trading and mining of cryptocurrency, these services invariably fall in a gray zone of the economy,” said Eric Jardine, the cybercrimes research lead at Chainalysis. It may be that Beijing’s proscription on crypto is loosely enforced, he added.

$1 Million Transfers

Chainalysis said about 55% of the total value received by China OTC traders comes from transfers worth more than $1 million. It isn’t possible to glean from the data whether the transfers are from wealthy individuals or businesses transacting on behalf of smaller customers, the consultancy added.

“Unless the regulatory situation in China becomes more favorable toward crypto, I would expect services like these to continue to grow over time,” Jardine said.

A variety of developments point to continuing crypto activity in China. For instance, Russian commodities firms and Chinese clients have used digital assets to settle some cross-border transactions, according to people familiar with the matter who asked not to be identified as the information isn’t public.

Elsewhere, a spate of police raids to stem billions of dollars in illicit foreign-exchange transactions highlighted the use of crypto. The raids spanned Beijing, the northeastern province of Jilin and Chengdu city in the southwest.

Last year, there were glimpses of Chinese crypto trading in the creditor profile of the collapsed FTX exchange, citizens who said they used crypto platforms and depictions by industry insiders of workarounds to Beijing’s restrictions.

Enforcement Challenge

“We have seen Chinese authorities move to crack down on crypto-enabled crime and tighten anti-money laundering laws, but the reality is that these bans are difficult to enforce given the borderless nature of the industry,” said Angela Ang, senior policy adviser at blockchain intelligence firm TRM Labs.

Digital-asset trading is allowed in Hong Kong, which pivoted in late 2022 toward creating a crypto hub. But few if any commentators see Beijing easing up on the official curbs on the mainland. Regulations also prevent Chinese citizens from readily accessing crypto investments in Hong Kong.

China’s central bank on Tuesday unleashed a blitz of policy support for the economy. Officials are also taking steps to bolster an ailing stock market. It remains to be seen if such measures curb underground demand for crypto exposure. Bitcoin has jumped about 140% in the past 12 months, compared with a 10% drop in China’s benchmark CSI 300 equity index over the same period.

Most Read from Bloomberg Businessweek

• Palantir’s CEO and Wall Street Annoy Each Other Straight to the Bank

• Five Reasons to Be Optimistic About the Entertainment Business

• Threats to Local US Election Officials Are Rising, and More Workers Are Quitting

• The Man Who Made Nike Uncool

• In Yosemite, Problems With Concessions Keep Piling Up

©2024 Bloomberg L.P.