Source: Adobe / leungchopan
The Chinese central bank, along 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 worrying for stablecoin issuers will be the fact that the parties mentioned Tether (USDT) by name – and warned that overseas exchanges targeting Chinese customers could be penalized.
The crypto market dived after the news. Bitcoin (BTC) fell 5% in an hour and corrected further down, 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 $ 41,116, down nearly 6% in one day and 14% in a week. ETH is down 9% in the last 24 hours and almost 22% in a week.
In a message on the headquarters website People’s Bank of China (PBoC) the group of government bodies spoke of the need to “eliminate” the crypto-related “hype” and “speculation”. It claimed that it would enact a number of measures, some of which seem particularly new given Beijing’s crackdown on crypto mining and crypto-related transactions over the summer.
“It seems like China is tightening the noose around Bitcoin and its citizens,” says Mati Greenspan, founder of Quantum economysaid Cryptonews.com. “They are very afraid of Bitcoin’s ability to facilitate capital flight and will do everything in their power to control money within their limits.”
However, the announcement appears to have caused confusion among international observers, especially since a social media post with the same announcement by the PBoC (as of today) appears to have dated the announcement back to September 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 group led by the PBoC wrote that “Cryptocurrencies like BTC, ETH and Tether have the main characteristics of” [tokens] issued by entities that are not [central banks]. “
These tokens, they noted, are “not legal and should not and cannot be used as currency”.
USDT is a major gateway for many Chinese traders looking to enter the BTC market.
And in another section, the parties wrote about foreign crypto trading platforms:
“Overseas cryptocurrency exchanges that provide services to Chinese residents are also engaged in illegal financial activities.”
They warned that China-based “employees who abuse foreign exchanges, as well as legal entities who [knowingly] deploy abroad [trading platforms] with services such as marketing, advertising, payments, billing, technical support and more “would be” investigated in accordance with the law “.
In addition, the National Business Daily reported, the PBoC has reminded that Chinese financial institutions “cannot provide services such as account opening, money transfers, clearing and settlement” for “cryptocurrency-related business activities” and cannot “lock in cryptocurrency”. when calculating collateral.
The central bank also reminded commercial banks of their duty to report crypto-related activities “in a timely manner” to the necessary financial regulators.
In addition to the PBoC, the members of the group included the following organizations and committees:
- Supreme People’s Court
- Supreme People’s Prosecutor
- Ministry of Industry and Information Technology
- Ministry of Public Security
- Central cyberspace administration
- General administration of market surveillance
- China Banking and Insurance Regulatory Commission
- Securities regulator
- State foreign exchange administration
Meanwhile, Wen Xinxiang, the director of the PBoC’s payments and settlement division, has spoken about the dangers of crypto. Via Shangai Securities News today, Wen told China Payment and Settlement Forum attendees that he was concerned about how crypto is now being used to move illicit funds across national borders.
He claimed that crypto was now divided into two categories, with tokens like BTC providing a source of liquidity while USDT and other coins were used for payments.
Wen stated that this posed a number of potential dangers by diverting (and damaging) payments from “banks” and “payment providers” and “weakening” clearing organizations.
He also claimed that they enabled “illegal activities” to use crypto, “which make it easier” to conduct criminal transactions and commit money laundering-related crimes.
In both cases, the China news is currently attracting a lot of attention.
As an obvious reaction to the news, the prices of tokens related to exchanges linked to China, such as China’s, were raised Huobi and OKEx, were hit the hardest, with the Huobi Token (HT) falling nearly 14% in the past hour and OKB falling 11% in the hour.
It is also noteworthy that the news just broke on a major bitcoin options expiration date, previously reported as one of the largest options expiration dates in 2021.
Popular crypto trader Scott Melker, also known as The Wolf of All Streets, told Cryptonews.com that China “has repeatedly” banned “Bitcoin and cryptocurrencies, so this message is more like the same.”
Melker expects that “the market will react with the usual short-term panic when the news is absorbed, and then that traders and investors will realize that little has changed and that the market is becoming rational again.”
“The Fear & Greed Index tells us that we are in a state of fear that could lead to a temporary sell-off, but that’s all due to China FUD (Fear Uncertainty and Doubt) which is only positive for crypto,” Freddie Williams , Sales Trader at the British digital asset broker GlobalBlockwrote in an email comment.
“We’ve seen this before from China, where news of 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 trending news as the chain’s fundamentals still suggest that the bull market is likely to continue into the fourth quarter,” Ulrik K.Lykke Executive Director, Crypto / Digital Assets Hedge fund ARK36said in an email comment.
He added that China has been going through a difficult economic period recently due to the uncertainty surrounding the crisis Evergrande Rescheduling.
“It is not unlikely that the Chinese government has realized that uncertainty has led to capital flight over digital assets and has stepped up its ban imposed in May to contain it,” Lykke said, adding that the willingness to use BTC to use “a very telling sign of righteousness” is how much long-term trust investors already have in this asset. “
George Zarya, CEO at Digital Asset Prime Brokerage and Exchange COMFORTABLE, also noted that China is known for going to extremes with very assertive statements and prosecutions to the point of complete radio silence.
“This time it was made very clear that China will not support the development of the cryptocurrency market as it goes against its policy of tightening control over the flow of capital and big tech,” Zarya said in an emailed comment.
According to him, not much is going to change for the institutional crypto industry as those who could have left have already left and those who could not have closed or gone under the radar.
“The retail market has most likely got under the radar and will continue to support market volume,” noted Zarya.
Meanwhile, Jeremy Allaire, the CEO of the US crypto company circle, the issuer of the second most popular stablecoin USD Coin (USDC), used Twitter to send a “message” to policymakers in the US and the West.
Allaire focused on the difference between the regimes and put China on the side, which among other things “opposes the Western value system based on openness, transparency, privacy and free market competition”.
Since the internet represents all of this, the government wants to control it. In the crypto industry, these values are “deep at the core of crypto and blockchains and anchor them in a new economic and governance infrastructure” and are therefore a threat to control and centralization-based systems.
Therefore, “there are two ways in which the US can respond to China,” he said:
“FOMO, envy and the belief that we should be more like them given their ability to execute; versus a stoic / determined attitude that believes in the open internet. Be on the right side of the story; embrace the open internet of values, ”argued Allaire.
Pat Toomey, the top Republican on the Senate Banking Committee, appears to agree:
Bitcoin and crypto fall along with stocks on China’s evergrande spillover risks
– China is tracking stealthy crypto miners ahead of the winter season
– Chinese banks strengthen digital yuan resources ahead of CBDC debut
– Chinese court says crypto is “not protected by law”
– China Releases e-CNY White Paper, Says Cryptos have no value and pose no risk
– China doubles crypto FUD by recycling old warnings
(Updated at 10:19 UTC with a comment by Scott Melker. Updated at 10:53 UTC with additional comments from the PBoC. Updated at 11:40 UTC with additional comments from Mati Greenspan and Freddie Williams. Updated at 13:26 UTC: Updates throughout text. Updated at 16:03 UTC with a tweet from Pat Toomey.)