The Chinese State Council, the organ of the country’s central government, released the minutes of a May 21 meeting hosted by its Financial Stability Development Committee at 10:00 p.m. on Friday, China time. The meeting commented on “cracking down on bitcoin mining and trading” 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 high-level signal. It remains to be seen whether or how this prominent commentary will be executed and to what extent. But it seems the news has already scared local investors.
Within an hour of 10:00 p.m. local time, HT, OKB and BNB, the exchange token of Huobi, OKEx and Binance, which cater to crypto traders based in China, fell 17%, 19% and 10%, respectively. The dive continued in the following days. Meanwhile, BTC and ETH fell around 10% shortly after the news broke, but have since rebounded to around $ 37,000 and $ 2,300, respectively.
Additionally, hours after the news hit Chinese crypto and mainstream media, the exchange rate between Tether’s USDT and the over-the-counter desk renminbi began to dip at a noticeable negative premium compared to at the exchange rate between the renminbi and the renminbi dollars.
This means that local traders, including miners, are seeing an increasing volume of orders to liquidate their Chinese yuan USDT through OTC offices amid uncertainty over comments from the State Council meeting.
Dovey Wan, founding partner of Primitive Ventures, said on twitter that she “knew that a few big miners had already cashed in the last 6 hours since the news came out, sold relentlessly and seized every possible channel for fiat off ramp.” “
Real-time quotes for 1 USDT by the OTC offices on Huobi, OKEx and Binance are currently 6.33 yuan, but they have fallen from over 6.5 yuan before the news to as low as 6.2 yuans around Saturday midnight China time. Currently, the exchange rate for 1 USD is about 6.44 yuan.
Meanwhile, blockchain data shows that the real-time hash rate connected to major bitcoin mining pools has seen small to moderate declines in the 24 hours since the news broke. Huobi’s bitcoin mining pool, however, has seen a huge 29% drop in the past 24 hours. Overall, there has been a significant drop in bitcoin’s hash rate since last week due to power plants in Chinese Sichuan facing an energy limitation.
Thursday’s meeting is a regular meeting of the Financial Stability Development Committee to discuss their high-level priorities in the financial space and it was chaired by Chinese Vice Premier Liu He, considered a right-hand man of the Chinese President Xi. Jinping. Liu was also known to have led the group of Chinese delegates in trade talks with the Trump administration over the years.
On the basis of the meeting notes, the Committee defined three areas of focus: “ensuring that the financial sector better serves the economy”, “committing to prevent financial risks” and “continuing to deepen reform”.
In addition to cracking down on bitcoin mining and trading activities, the “financial risk prevention” section mentioned other priorities such as reducing credit risks, enforcing regulations on corporate financing activities, maintaining the stability of stock markets, debt and foreign exchange, among others. other.
Comments made at the meeting do not constitute an official order or rule. In order for them to be executed, more concrete rules are needed regarding the government body that will direct the execution. For example, in September 2017, it was the People’s Bank of China, along with six other ministries, that banned initial coin offerings and fiat-to-crypto trading.
But the comments on bitcoin mining come at a time when China is stepping up efforts to achieve the carbon neutral mission that Xi has promised in his recent remarks.
It was against this background that a group of researchers from Chinese universities published a research paper on Nature Communications which claimed that bitcoin mining would pose a serious threat to China’s carbon neutrality mission without political intervention. appropriate, although the article is based on an error, if not inaccurate, assumption.
The government of Inner Mongolia has already taken a series of measures to drive out bitcoin mining operations in the region, where energy is mainly based on coal. It has set up dedicated email and email addresses and a hotline this week for the general public to find out where active bitcoin mining farms are located.
That said, if high-level comments on cracking down on Bitcoin mining activities are executed in the coming months, it could accelerate the global decentralization of Bitcoin’s hash rate outside of China, where the dominance of the computing power is already disappearing.
At the time of going to press, no major bitcoin mining operations in China, with the exception of B.Top, a joint mining and equipment brokerage service under China’s BTC.top mining pool, have publicly contributed no immediate business change while taking time to wait. approach.
Jiang Zhuo’er, founder and CEO of BTC.top, said on Weibo local time on Saturday morning that his b.top business would stop serving customers based in mainland China.
“B.TOP has not received any regulatory requirements from the relevant government agencies. But given the latest regulatory signal and the fact that B.TOP’s mainland Chinese business is a small part of our exclusive mining business, there is no need to continue offering brokerage services to miners. serving mainland Chinese consumers and taking additional regulatory risks, ”Jiang wrote.
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