The Chinese central bank, along with a group of ministries, financial regulators, and national-level courts, has issued a joint statement confirming a hard-line stance on crypto. And perhaps worryingly for stablecoin issuers will be the fact that the parties have mentioned tether (USDT) by name – and warned that overseas exchanges that target Chinese customers could face punishment.
The crypto market dived following the news. Bitcoin (BTC) dropped by 5% in an hour, hitting USD 43,234 (09:42 UTC), while ethereum (ETH) lost more than 7% of its value, moving below USD 2,900. Other major altcoins dropped by 6%-9%.
In a notice posted to the website of the central People’s Bank of China (PBoC), the group of government organs spoke of the need to “eliminate” crypto-related “hype” and “speculation.” It claimed that it would enact a number of measures, few of which appear to be particularly novel in light of Beijing’s summer crackdown on crypto mining and crypto-related transactions.
The announcement appears to have sparked no shortage of confusion among international observers, however, particularly as a social media post with the same announcement from the PBoC (from today) appears to have backdated the announcement to September 15.
In the announcement, the parties spoke of the need to wipe out “criminal activities such as gambling, illegal fund-raising, fraudulent activity, pyramid schemes, and money laundering.”
In one section, the PBoC-led group wrote that “cryptocurrencies such as BTC, ETH and tether exhibit the main characteristics of [tokens] that have been 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 who wish to access the BTC market.
And in another section, the parties wrote of overseas crypto trading platforms:
“Overseas cryptocurrency exchanges that provide services to Chinese residents are also engaging illegal financial activities.”
They warned that China-based “staff of offending overseas exchanges, as well as legal entities that [knowingly] provide overseas [trading platforms] with services such as marketing, promotion, payments, settlements, technical support and more” would “be investigated in accordance with the law.”
Furthermore, the National Business Daily reported, the PBoC has reminded that Chinese financial institutions must “not provide services such as account opening, fund transfers, clearing and settlements” for any “cryptocurrency-related business activities,” and must not “include cryptocurrency” in collateral calculations.
The central bank also reminded commercial banks of their duty to report crypto-related activities to the necessary financial regulators “in a timely manner.”
The group’s members comprised the following organizations and bodies, in addition to the PBoC:
- Supreme People’s Court
- Supreme People’s Procuratorate
- Ministry of Industry and Information Technology
- Ministry of Public Security
- 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 Payment and Settlement Department at the PBoC, has been speaking of the perils of crypto. Per Shangai Securities News, Wen told attendees at the China Payment and Settlement Forum today that he was worried about the way crypto was now being used to transfer illegal funds across national borders.
He claimed that crypto was now divided into two categories, whereby tokens like BTC were providing a source of liquidity, while USDT and other coins were being used for payments.
Wen explained that this would cause a number of possible hazards, by diverting payments away from (and thus damaging) the “business of banks” and “payments providers” and “weakening clearing organizations.”
He also claimed that they enabled “illegal activities” with crypto “making it easier” to conduct criminal transactions and commit money laundering-related offenses.
In either case, the China news is getting widespread attention at the moment, including reporting in mainstream financial news outlets like Bloomberg.
In an apparent response to the news, prices of tokens associated with exchanges with ties to China, such as Huobi and OKEx, were hit the hardest, with huobi token (HT) down nearly 14% in the past hour and OKB down 11% for the hour.
Noteworthy is also that the news broke just as a major bitcoin options expiry has taken place, which was previously reported as one of the largest options expiry days of 2021.
Popular crypto trader Scott Melker, aka The Wolf of All Streets, says that China “has repeatedly “banned” Bitcoin and cryptocurrencies, so this news is more of the same.”
Melker expects “the market to react with the usual short term panic as the news is absorbed, and then for traders and investors to realize that little has changed and for the market to become rational once again,” he told Cryptonews.com.
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(Updated at 10:19 UTC with a comment from Scott Melker. Updated at 10:53 UTC with additional comments from the PBoC.)