Recent Chinese comments on bitcoin mining and trading have sparked some concerns among Chinese traders and miners as the USDT has seen a noticeable sell-off against the Chinese yuan since the news broke.
The State Council of China released the minutes of the May 21 meeting hosted by the Financial Stability Development Committee at 10:00 pm Friday, China time.
The meeting came out with comments on the need to crack down on Bitcoin mining and trading activities as part of the committee’s efforts to prevent financial risks.
This is the first known case where comments specifically about Bitcoin mining and trading were raised at a state council committee meeting as a signal from a high-level body.
It remains to be seen whether or how and to what extent this major comment will be implemented.
But the news appears to have already spooked local investors.
In the hour after 10:00 local time, the price of the “HT”, “OKB” and “BNB” trading platforms, which cater to the needs of cryptocurrency traders in China, decreased by 17%, 19% and 10% respectively.
The decline extended further in the following days.
Meanwhile, Bitcoin and Ethereum fell by about 10% shortly after the news spread, but they have since bounced back to about $ 37,000 and $ 2,300, respectively, to continue the decline, at this moment reaching $ 34,800 and $ 2,000.
In addition, within hours after the news reached Chinese cryptocurrency websites and the major media, the exchange rate between the USDT currency against the renminbi on OTC offices began to decline to a negative premium.
This means that local traders, including miners, are seeing an increasing volume of requests to liquidate USDT into Chinese yuan through OTC offices amid the uncertainty raised by the comments of the State Council meeting.
He said , “Duffy Wan,” co – founder of the “Primitive Ventures” on Twitter:
I learned that quite a few large miners have actually spent their money in the past six hours since the news broke, selling relentlessly and capturing all possible channels.
Real-time prices of 1 USDT by the OTC offices of Huobi, OKEx and Binance are now at 6.33 Yuan but dipped from above 6.5 Yuan ahead of the news to 6.2 Yuan at midnight Saturday China time.
Currently, the foreign exchange rate for one dollar is about 6.44 yuan.
Meanwhile, blockchain data shows that the real-time hash rate connected to major bitcoin mining pools has seen some small to medium declines over the 24-hour period since the negative news spread.
However, Huobi’s bitcoin mining complex has witnessed a massive 29% decline in the past 24 hours.
In general, there has been a significant drop in the bitcoin hash rate since last week due to the fact that power plants in Chinese “Sichuan” were facing restrictions on energy consumption.
What exactly happened?
Thursday’s meeting is a regular meeting of the Financial Stability Development Committee to discuss their high-level priorities in the financial field. It was chaired by Vice Premier Liu He, who is the right hand of Chinese President Xi Jinping.
Liu is also known for leading the group of Chinese delegates during business talks with the Trump administration over the years.
Based on the meeting notes, the committee identified three main areas of focus:
- Ensure that the financial industry best serves the economy.
- Commitment to preventing financial risks.
- Continue to deepen reform.
Aside from suppressing bitcoin mining and trading activities, the “Financial Risk Prevention” section mentioned other priorities such as reducing credit risk, enforcing regulations on corporate finance activities, and maintaining stability in stocks, debt and foreign exchange markets, among others.
Meaning, comments made at the meeting do not constitute an official decree or regulation.
For it to be implemented, there must be more concrete rules in terms of the government agency that will take the lead in implementation.
For example, in September 2017, the People’s Bank of China along with six other government ministries issued a ban on initial coin offerings and cryptocurrency trading and was implemented.
But the comments on bitcoin mining come at a time when China is stepping up its efforts to achieve the mission of carbon neutrality that President “Xi” undertook in his recent statements.
The coming days will provide us with clearer answers and explanations for the reason for this negative news and suggestions towards Bitcoin.