This was just on Sep 24, that China’s Central Bank released a new document, pretty dreadful as tougher norms were listed out there, in its wider crypto crackdown, which also had brought forth systems to check transactions that involve crypto.
Across China and Hong Kong, crypto holders rush to uncover safe homes to cover their digital assets like bitcoins and others with safety, reveals an attorney who consults with such people located in other countries.
Such attitude of haste to ensure bitcoins don’t go waste, is in wake of People’s Bank of China declaration through its website stating all transactions with crypto in the middle, to be unlawful which also includes services provided by offshore exchanges.
Domino effect, Bitcoin plunged by 6% and ether drowned by 10% in a vast sell-off early Friday and as investors came to terms with the news.
Addressing media, David Lesperance, a lawyer based in Toronto, spoke his heart out, “Since the announcement two hours ago, I have already received over a dozen messages- emails, phone and encrypted app- from Chinese crypto holders looking for solutions on hot to access and protect their crypto holdings in foreign exchanges and cold wallets”.
Mr Lesperance refers to the move as an effort to deactivate crypto assets with which stakeholders will be helpless and clueless to accomplish something in a clean legal way. He quoted an event from history somewhat similar, “Along with not being able to do anything with an extremely volatile asset, my suspicion is that like with Roosevelt and gold, the Chinese government will “offer” them in the future to convert it to e-yuan at a fixed market price. This was President Franklin Roosevelt’s policy about gold’s private ownership, which was reversed later.
He went ahead and vented his pent up energy,” I have been predicting this for a while as part of the Chinese government’s moves to close out all potential competition to the incoming digital yuan”.
The People’s Bank of China made its intentions clear on its website that all transactions involving crypto-currency are illegal which also covers the services provided by offshore exchanges. Likewise, services ranging from trades, issuing tokens, derivatives for virtual currencies, etc. are also banned now, going by the PBOC.
Such a directive targets over-the-counter platforms, like OKEx, as users in China are allowed to exchange usual money for crypto tokens. OKEx opened up before the media stating that the company considers the steps to be taken following such news from the Chinese government that shook the crypto ground.
Breaking the expectation barriers, Mr. Lesperance asserts even the safety issues for his clients.
He shared, “They are concerned about themselves personally, as they suspect that the Chinese government is well aware of their prior crypto activities, and they do not want to become the next Jack Ma, like “common prosperity” target”.
In media streams worldwide, Chinese action is considered authoritarian as digital currencies are being lashed out at.
In the year 2013 too, bitcoin was discouraged from the third-party payment providers, in the country and in 2017, token sales were halted from taking place, by the Chinese authorities while crypto exchanges were brought under a dark cloud in 2019.
In the case of the current year, China uprooted the crypto mining industry resulting in a complete halt in operations across the bitcoin network spanning the globe for some months.
Mr. Boaz Sobrado, who is a fintech data analyst in London opined, “Today’s notice isn’t exactly new and it isn’t a policy change”.
However and unlike before, 10 agencies emerge in the purview of crypto announcements, such as the Supreme People’s Court, the Supreme People’s Procuratorate and the Ministry of Public Security which simply emphasize the deep impact of the order.
There has been a perfect unison among the multiple Chinese authorities and perfect coordination, this time around. Consider the chronology, National Development and Reform Commission in China put a ban on all crypto mining on September 03 and PBOC puts forth this document on September 15. Both used official government platforms for channeling their order. Besides, uniquely this time, document names bitcoin, Ethereum and tether as stablecoins which would be under the sharp eye of the regulators in China.
Regarding such a departure from the past announcements, Mark Peikin, CEO of Bespoke Growth Partners considers the order as the beginning of rising pressure on bitcoin price as well as of other cryptocurrencies on a wider level as “the risks facing Chinese investors will have a significant spillover effect, leading to an immediate risk-off trade in the US crypto market.”
Before media, he asserted, “Chinese investors, many of whom continued to turn a cloud shoulder to the Chinese government’s latest and largest crackdown on cryptocurrency trading the last several months, may no longer remain bellicose.”
He added,” Chinese investors thus far largely skirted the ban by decoupling transactions- using domestic OTC platforms or increasingly of late, offshore outlets, to reach agreement on a trade price, and then using banks or fintech platforms to transfer yuan in settlement”.
Further ahead, the capabilities of PBOC have also been refined to check crypto-based transactions and in recent order, fintech companies are asked to stay away from unrolling crypto-centric services but in Mr. Peikin’s observation such is a tough path to walk and investors would uncover other ways leading to crypto, sooner or later.
Teeming with distrust and gloom, PBOC declaration was not the lone news coming out from China’s Finance field, which has unsettled crypto markets, but liquidity crisis has hit the prime real estate developer Evergrande which triggered concerns in the property sector in the country. As was expected, such fear sent the price of multiple cryptocurrencies into the red zone.
As for such pressure on the crypto market to last, not many harbour such belief. In Mr. Sobrado’s view, to PBOC’s announcement made last Friday, such is an overreaction on part of the market as most of the amount in such exchange in this country is managed in a decentralized manner and is conducted on a peer-to-peer basis, which is the most compelling aspect of crypto adherence. Now, when one goes to exchange tokens P2P regulatory scrutiny would be there but again, it is tough to get hold of such exchanges, as per Mr. Sobrado.
In the case of Mr. Lesperance, he hails news broke on Friday as such would strengthen the business case for crypto as an asset category, as such can be a protection against national risk.
Finally, it is yet to be seen if such a directive from high seats of power in Beijing has teeth and Mr. Subrado comes here, “The running joke in the crypto is that China has banned crypto hundreds of times. I’d be willing to wager people will be trading bitcoin in China a year from now”.
In India, such is already banned and bantered at length.