Source: Adobe / leungchopan
The Central Bank of China, together with a group of ministries, financial regulators and courts at the national level, issued a joint statement confirming a tough stance on crypto. And perhaps troubling for stablecoin issuers will be the fact that the parties have mentioned Tether (USDT) by name – and warned that foreign exchanges targeting Chinese customers could be penalized.
The crypto market dipped after the news. Bitcoin (BTC) fell 5% within an hour and continued to correct lower, Ethereum (ETH) lost more than 7% of its value, and major altcoins fell 6% -9% right after the story broke. At 13:24 UTC, BTC is trading at USD 41,116 and is down nearly 6% in one day and 14% in one week. ETH fell 9% in the last 24 hours and nearly 22% in a week.
In a statement on the website of the Central People’s Bank of China (PBoC), the group of government bodies spoke of the need to “eliminate” crypto-related “hype” and “speculation.”It has been claimed that it would take a number of measures, some of which seem particularly new given Beijing’s crackdown on crypto mining and crypto transactions over the summer.
“It seems like China is tightening the noose for Bitcoin and its citizens even further,” Mati Greenspan, founder of Quantum Economics, told * *. “They are very afraid of Bitcoin’s ability to facilitate capital flight and will do everything in their power to control the money within their borders.”
However, the announcement does not seem to have caused a lack of confusion among international observers, especially since a social media post with the same announcement from the PBoC (as of today) postponed the announcement to March 15.
In the announcement, the parties spoke of the need to eradicate ” criminal activities such as gambling, illegal fundraising, fraudulent activities, pyramid schemes and money laundering.”
In one section, the PBoC-led group wrote that ” cryptocurrencies such as BTC, ETH and Tether have the main characteristics of [tokens] issued by companies that are not [central banks].”
These tokens, they noted ” are not legal and should not and cannot be used as currency.”
USDT is an important gateway for many Chinese traders looking to access the BTC market.
And in another section, the parties wrote about overseas crypto trading platforms:
“Overseas cryptocurrency exchanges that provide services to Chinese residents also engage in illegal financial activities.”
They warned that China-based ” employees of offending foreign exchanges, as well as legal entities that [knowingly] provide foreign [trading platforms] with services such as marketing, advertising, payments, settlements, technical support and provide more ” will be investigated in accordance with the law.”
In addition, the National Business Daily reports, the PBoC has reminded that Chinese financial institutions are “not allowed to provide services such as account opening, transfers, clearing and settlements” for “cryptocurrency-related business activities” and not to include “cryptocurrency” in security calculations.
The Central Bank also reminded commercial banks of their duty to report crypto-related activities to “financial regulators ” in a timely manner.”
The members of the group included, in addition to the PBoC, the following organizations and bodies:
- Central Cyberspace Administration
- General Administration of Market Supervision
- China Banking and Insurance Regulatory Commission
- Securities Regulatory Commission
- State Administration of Foreign Exchange
Meanwhile Wen Xinxiang, the director of the PBoC’s payments and settlement department has spoken of the dangers of crypto. Per Shangai Securities News, Wen told attendees at the China Payment and Settlement Forum today that he was concerned about how crypto was now being used to transfer illegal funds across national borders.
He claimed that crypto was now divided into two categories, with tokens such as BTC providing a source of liquidity, while USDT and other coins were used for payments.
Wen explained that this would create a number of potential dangers by diverting (and thus damaging) payments from the “business of banks” and “payment providers” and “weakening clearing organizations”.”
He also claimed that they enabled” illegal activity”with crypto” which makes it easier ” to conduct criminal transactions and commit money laundering-related crimes.
In both cases, the China news is receiving wide attention at the moment.
In an apparent response to the news, the prices of tokens linked to exchanges with links to China, such as Huobi and OKEx, have been hit hardest, with Huobi Token (HT) falling by almost 14% in the last hour and OKB by 11% for the hour.
It is also noteworthy that the news just became known as an important expiration of Bitcoin options, which was previously reported as one of the biggest expiration days of options of 2021.
The popular crypto trader Scott Melker, also known as the wolf of all streets, said * * that China has repeatedly “banned” Bitcoin and cryptocurrencies, so this news is rather the same.”
Milker expects ” that the market will react with the usual short-term panic when the news is absorbed, and that traders and investors will realize that little has changed and the market will become rational again.”
“The Fear & Greed Index tells us that we are in a state of fear, which could lead to a temporary sell-off, but this is all due to China FUD (fear of uncertainty and doubt). The current adoption rate is significant and this is only positive for crypto” Freddie Williams, sales trader at British digital asset broker GlobalBlock, wrote in an email comment.
“We’ve also seen this from China, where bans have been reported over the years, but it hasn’t stopped the adoption of Bitcoin and digital assets from continuing their upward trend,” Williams added.
“Investors should be careful not to make emotional decisions based on this trend news, as the fundamentals in the chain still indicate that a continuation of the bull market is likely in Q4,” Ulrik K. Lykke executive director at crypto/Digital assets hedge fund ARK36 said in an emailed comment.
He added that China has recently been going through a difficult economic situation due to the uncertainty surrounding the Evergrande debt restructuring.
“It is not unlikely that the Chinese government has realized that uncertainty has caused a flight of capital via digital assets and has stepped up its ban imposed in May to curb this”Lykke said, adding that the willingness to use BTC” is a very telling sign of how much long-term confidence investors already have in this asset.”
George Zarya, CEO of Digital asset Prime Brokerage and Exchange VERMANT, also noted that China is known for this, to go to extremes with very assertive statements and prosecutions to complete radio silence.
“This time, the point has been made very clearly that China will not support the development of the cryptocurrency market, as this goes against its policy of tightening control over the flow of capital and big tech,” Zarya said in a comment sent via email.
According to him, not much will change for the institutional crypto industry, since those who could already leave have left and those who could not have either closed or gone under the radar.
“The retail market has most likely gone under the radar and will continue to support market volume,” Zarya noted.
Jeremy Allaire, CEO of US-based crypto company Circle, the issuer of the second most popular stablecoin USD coin (USDC), took to Twitter to send a “message” to US and Western policymakers.
All this focused on the difference between regimes, putting China on the side that ” opposes the Western value system based on openness, transparency, privacy and free market competition.”
Since the Internet represents all this, the government wants to control it. With the crypto industry, these values are “deeply entrenched at the core of crypto and blockchains, anchored in a new economic and governance infrastructure,” and therefore pose a threat to the systems built on control and centralization.
Therefore” there are two ways of responding to China in US”he said:
” FOMO, envy and the belief that we should be more like them, given their ability to execute; vs a stoic / determined attitude that believes in the open Internet. Be on the right side of history; embrace the open Internet of value,” Allaire argued.