Al Jazeera’s Ben Grieve reports from Hong Kong on the recent news of a trader who had vanished from the Alpaca Trading Exchange and the rise of a new market for trading in a virtual currency.
The trading site was taken down last month after a major security breach.
The Chinese government was also criticised for its crackdown on the trading platform, which had attracted hundreds of thousands of users.
The disappearance of a former Alpacan trader is a significant blow to a virtual economy in China and has prompted concerns about its future.
But a growing number of Chinese traders are now trading in virtual currencies.
China has the world’s biggest market for virtual currencies, with almost half a billion people trading them.
A report by the Economist Intelligence Unit (EIU) in December said virtual currencies had reached a new high of $7bn, up from $3.5bn a year earlier.
The report cited China’s government as the main driver for this growth, as it controls the supply of coins, currency and other assets that can be used to trade virtual currencies on the platform.
China’s central bank has also announced it will soon ban virtual currencies such as bitcoin, while the country has also introduced strict laws on virtual currency trading.
In the case of Alpaco, the trading site shut down last year, and was the subject of a major hack.
The company was forced to shut down operations for several months after it was hacked.
The Alpacas trading site also closed down earlier this year after being hacked, and a new website has emerged.
The Chinese government has responded by clamping down on the virtual trading space.
On March 29, the Chinese government banned the use of virtual currencies in all official accounts, and banned the import of virtual currency into the country.
The announcement came just days after the US Treasury announced that it would ban the importation of virtual coins, citing the growing threat of a virtual economic crisis in China.
China, the world champion of digital currencies, has also cracked down on foreign investment in the country’s financial sector, limiting foreign direct investment (FDI) in the banking, insurance, real estate, mining and other sectors.
According to the EIU report, the number of foreign direct investments (FDDIs) into the Chinese financial sector has fallen by 70% in the last five years.
China also has a high number of FDDIs in other sectors such as manufacturing, telecommunications, retail, retailing, consumer goods and energy, as well as financial services, which the EPU found had experienced a 40% drop in FDDI inflows since 2014.
China banned the export of US$1.8bn in digital currency in 2016, and the number fell by 30% in 2018.
The number of virtual exchanges operating in China has also grown since last year.
The number of exchanges in the mainland rose from 2,100 in January 2016 to 1,850 in January 2018.
China now has over one billion people using virtual currency, according to a report by research firm eMarketer.
The growth of virtual trading sites has also come as a blow to the world of online stock market trading.
A global network of virtual marketplaces, or exchanges, has been used to allow stockbrokers and hedge funds to trade stock prices on the platforms of leading financial firms.
But the proliferation of virtual markets has also meant that the trading of physical stock prices is becoming harder.
The rise of virtual traders, who have to pay fees to use the exchanges, makes it more expensive for investors to buy stocks online.
A recent report by financial services company iTrade found that online stock markets have lost market share from physical markets.
“The growth in trading in digital currencies has also led to increased competition for digital markets,” iTrade chief research officer Andrew Coates said in a statement.
“This has resulted in more competition for the most valuable shares, which means that companies will need to seek higher margins.”
China is the world leader in virtual trading, but there are fears that the country is becoming more reliant on the exchanges to facilitate trading of the physical stock market.
A Chinese government-appointed expert has warned of the risks of unregulated trading, and has called for stricter regulation.
But for some Chinese traders, it has become cheaper and easier to trade the virtual currency than to buy shares in the physical market.