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Chinese Vice Premier Liu He said on Friday that it was necessary to “crack down on Bitcoin’s mining and trading behavior” to avoid risks to the “social field”. Chinese authorities have long been concerned about the speculative nature of cryptocurrencies and their risk to the stability of the financial system. The Deputy Prime Minister’s latest comments raised fears of an intensification of the repression.
But Beijing’s harsh words are nothing new. In 2017, China shut down local cryptocurrency exchanges and banned so-called Initial Coin Offerings (ICOs), a way to raise funds for cryptocurrency companies by issuing digital tokens.
As of November 2015, around 92% of bitcoin exchanges were made with the Chinese currency renminbi, according to data from CryptoCompare, a cryptocurrency data company. Chinese traders had the ability to move the market quite significantly on any bitcoin related news in China. But in November 2017, the Chinese renminbi only represented 0.07% of the total bitcoin market.
“The waning influence of Chinese bitcoin traders is an exaggerated story,” Graham told CNBC. “The point is, Chinese traders still wield enormous influence. “
China’s role in bitcoin was brought back into the limelight last week after authorities reiterated that financial institutions should not get involved in cryptocurrency ventures such as trading or aid in the exchange of fiat into digital coins. These were not new regulations.
Chinese investors were also selling, but their transactions may have been driven by other factors.
“For clarity, anecdotal Chinese retail investors were heavily involved in yesterday’s sale. But that was more a function of price action than anything to do with local regulations, ”Graham said Thursday.
What Happened to Chinese Bitcoin Trading?
Some of these platforms offer crypto to crypto exchanges such as buying bitcoin with the US dollar linked stablecoin called tether (USDT). Some platforms offer a renminbi to USDT conversion service that allows Chinese users to get the necessary encryption to buy bitcoin.
In early September 2009, when China ordered the closure of local cryptocurrency exchanges, bitcoin was trading at just over $ 4,000. As of Tuesday, it stood at over $ 38,000, according to data from CoinDesk.
“I think there are more (Chinese) traders (now). Bitcoin has gained an order of magnitude in price, ”Bobby Lee, former CEO of one of China’s top cryptocurrency exchanges BTCC, told CNBC.
“Nowadays, more and more people are using stable currencies like USDT,” said Lee, who is also the founder of the Ballet cryptocurrency wallet.
“What this means is they don’t have to handle RMB transfers anymore, they switch to a USDT payment company and move in and out of bitcoin. It becomes an underground currency. “