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Comment by EZ-E | Hacker News Reader

Can you explain the shadow banking / conversion angle? All I found was that selling knives was used to get a discount on steam balance thanks to price arbitrage.

> "Selling Knives" (挂刀) refers to the technique of buying in-game items from 3rd-party (Chinese) trading sites like NetEase BUFF, C5, IGXE, and UUYP, and then selling them on the Steam Market to obtain a discounted Steam Wallet balance by capitalizing on price differences.

I'm surprised the price difference did not disappear if people make that trade.

Source https://github.com/EricZhu-42/SteamTradingSiteTracker/wiki

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China notoriously has intense capital controls. It's difficult for ordinary Chinese citizens to take capital out of the country. CS2 items can be bought and sold in both USD and RMB, and can be transferred between Chinese and international accounts. It's not about Steam wallet balances.

Interesting. I'm curious though, assuming I am Chinese and I trade knives for USD - where would I be able to receive USD to evade capital control? Surely not my bank account or Steam wallet. Or is it for people with bank account in both countries? But in that case crypto could be more convenient? I'm puzzled

Yes you would need to receive in a foreign USD bank account outside of China, the whole goal is to get the capital out of China and into a foreign account. Cryptocurrency transactions/exchanges are illegal in China so that's definitely not convenient! Meanwhile you can buy CS2 items with any ordinary payment method.

Both US and CN have a massive player base, they all need to buy games in their own currency

You can buy games with Steam Wallet

You can also buy/sell in-game items with Steam Wallet

Now only if someone invents a commodity with a stable price. Hmm what could that be?

Remember the 15% transaction fee on the Steam market? That's why the price difference hasn't disappeared. Players can avoid this fee through gifting and off-platform transactions. And all of this is just Chinese players trying to buy games cheaper—after all, what else can Steam wallet funds be used for? Some comments claim this is a way for Chinese people to evade financial regulations, but that's complete nonsense. The Steam market's capacity is entirely insufficient to meet the demand. They could easily choose to legally exchange currency using the foreign exchange quotas of relatives and friends, engage in cross-border wash trading through underground banks, or use fake trade and fake investment schemes.

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