Bitcoin wealth management platforms in China continue to promise annualised returns of up to 40% to investors, despite Beijing’s decision to ban a slew of virtual currency operations earlier this month.
The recent crackdown on cryptocurrencies in China means online platforms are no longer permitted to launch initial coin offerings, convert virtual currencies into the Chinese yuan, or provide any form of associated financing.
The regulatory push by Beijing has already compelled China’s three leading Bitcoin platforms, who jointly account for 60% of virtual currency transactions within the country, to suspend operations.
Reports have also circulated that executives from BTC China, Huobi.com and OKCoin are being prevented from leaving the Chinese capital before regulators complete related investigatory work.
The intensity of the September crackdown on virtual currencies launched by Beijing has left many of China’s online wealth management platforms undeterred, however, with some continuing to offer virtual currency investment services that promise exorbitant returns, or capitalise upon emerging arbitrage opportunities.
One example is Bitbank.com, which is a subsidiary of Biyin Group (比银集团) founded by Chinese virtual currency entrepreneur Hua Songxiu.
As of the time of writing Bitbank’s official website was offering variable returns for deposits of at least 100 Bitcoins, including 4.6% for three-month wealth management products, 5.6% for six-month wealth management products and 6.6% for one-year wealth management products.
The company also offers P2P lending services, including one 2,500 Bitcoin product with a term of 180 days promising a return of 8.91%.
While Beijing’s crackdown on ICO’s had the goal of putting the kibosh on virtual currency financing, it’s had the unintended consequence of creating ample arbitrage opportunities for savvy online operators by dragging down mainland Bitcoin prices.
Some platforms are explicitly basing their promotional efforts around these new opportunities, such as LJZBTCBank.com (陆家嘴比特币基金), whose official website offers a “Bitcoin arbitrage fund.
LJZBTCBank says its fixed term products with 365 day maturities provide annualised rates of return of up to 40%.
According to its website LJZBTCBank.com has 100 billion yuan of digital assets under management.
Bitgo.net (比特购理财) is another platform offering a range of Bitcoin wealth management products based on arbitrage strategies, claiming its annualised returns have hit highs of 38% in the past.
While these activities by Bitcoin platforms would at first blush appear to run contrary to Beijing’s virtual currency crackdown, Xue Hongyan, a researcher with the Suning Financial Research Institute, said to The Beijing Daily that none of them breach existing Chinese regulations given the limited reach of the latter.