China's announcement on Tuesday of a tougher ban on banks and payment companies offering crypto-related services furthered a selloff that briefly wiped $1 trillion off crypto market capitalisation.
But fears that the rules would cripple cryptocurrency markets and mining on the Chinese mainland appear baseless. Cryptocurrencies could still be bought from China on Thursday and investment schemes promising juicy returns for mining them remained operational.
Bobby Lee, founder and CEO of Ballet, a cryptocurrency wallet app, said he thought the announcement was merely an attempt by regulators to protect retail investors from volatile markets, but that it would be a challenge for banks to identify crypto-related dealings.
"If you look at the banking activity in China, millions or maybe billions of transactions happen on a daily basis. From all that ... how many are actually really crypto services versus dining or e-commerce? It's almost unknowable," said Lee, formerly CEO of BTC China, China's first bitcoin exchange.
It's not the first time China has banned crypto-related financial and payment services. Beijing issued similar bans in 2013, and in 2017, though the latest one has expanded the range of prohibited services. The repeated bans highlight the challenge of closing the loopholes.
On Thursday, Reuters found it was still possible for Chinese individuals to buy bitcoin and other cryptocurrencies and trade them on overseas crypto exchanges such as Binance. Yuan payments for these purchases could be made via banks or commonly-used online payment platforms in over-the-counter (OTC) markets.
"If you have bitcoin or ethereum, and I want to buy some, I can just send money to you through banks. Just don't write down anything like bitcoin or ethereum," said Mr Li, who sells cryptocurrencies on behalf of miners.
"Of course, banks have internal risk-management. If the transaction volume is too big, you might be caught," said Li, who was unwilling to give his full name because of the sensitivities of the issue.
Players in China's crypto mining industry were also broadly unfazed by the latest crackdown, again citing the difficulties regulators would have in identifying transactions.
China-based miners have the opposite problem to investors, as they already have bitcoin which they need to change for yuan to pay their electricity costs.
Mining is big business in China, which accounts for as much as 70% of the world's crypto supply, according to some estimates, although others say that proportion has come down in recent years.
"The Chinese government does crack down from time to time, but currently it is not overly challenging to convert mined coins to RMB for Chinese miners," said Thomas Heller, chief business officer of Compass Mining, using another word for China's currency.
Although the new rules ban crypto-related investment products, such schemes are still sold online.
One platform offering retail investors a chance to quadruple their money over three years by buying computing power for miners of a smaller cryptocurrency, Filecoin, which has surged in popularity in China, still seemed to be accepting money on Thursday.
Flex Yang, chief executive officer of Babel Finance, a cryptocurrency financing firm, remained bullish.
"Bitcoin prices dropped more than 50% last year in March but eventually rebounded back to a new record high," Yang said.
"In the long run, bitcoin still makes for an excellent asset class for portfolio managers seeking growth."
(Reporting by Samuel Shen and Andrew Galbraith in Shanghai, Additional reporting by Kevin Yao in Beijing, Writing by Alun John, Editing by Vidya Ranganathan and Catherine Evans)
By Samuel Shen and Andrew Galbraith