China’s recent comments on bitcoin mining and trading have raised some concerns among Chinese traders and miners as the USDT has seen a significant selloff against the Chinese yuan since the news broke.

China’s State Council released the minutes of the May 21 meeting hosted by the Financial Stability Development Commission at 10:00 p.m. Friday CST.

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 put forward at a State Council committee meeting as a signal from a high-level body.

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It remains to be seen if or how and to what extent this major suspension will be implemented.

But the news seems to have alarmed local investors already.

In the hour after 10:00 pm local time, the price of the HT, OKB and BNB exchanges, which cater to cryptocurrency traders in China, fell 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 broke, but have since rebounded to around $37,000 and $2,300 respectively, only to continue falling, at this moment to $34,800 and $2,000.

Additionally, within hours after the news reached Chinese crypto websites and mainstream media, the USDT/RMB exchange rate on OTC trading desks started dropping to a negative premium.

This means that local traders, including miners, are seeing a growing volume of orders to liquidate USDT into Chinese yuan through OTC offices amid the uncertainty raised by the comments of the State Council meeting.

I said Dovi Wan, co-founder of Primitive Ventures on Twitter:

I learned that quite a few big miners have actually cashed in in the past six hours since the news broke, selling relentlessly and taking over all possible channels.

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Real-time prices for 1 USDT by the OTC desks of Huobi, OKEx, and Binance are now at 6.33 yuan but have fallen from above 6.5 yuan before 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 in the 24-hour period since the negative news spread.

However, Huobi’s Bitcoin mining pool has seen a massive 29% drop in the past 24 hours.

Overall, there has been a significant drop in Bitcoin’s hash rate since last week because power plants in Sichuan, China, were facing power consumption restrictions.

What exactly happened?

Thursday’s meeting, a regular meeting of the Financial Stability Development Committee to discuss their high-level priorities in the financial field, was chaired by Chinese Vice Premier Liu He, who is considered the right-hand man of Chinese President Xi Jinping.

Liu is also known for leading the group of Chinese delegates during trade talks with the Trump administration over the years.

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Based on the meeting’s observations, the committee identified three main areas to focus on:

• Ensuring that the financial industry serves the economy better.
• Commitment to prevent 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 the stability of equity, debt, and foreign exchange markets, among others.

Meaning that the 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 which government agency will take the lead in implementation.

For example, in September 2017, the People’s Bank of China, along with six other government ministries, issued and implemented a ban on ICOs and cryptocurrency trading.

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 pledged in his recent remarks.

The coming days will provide us with clearer answers and explanations for the reason for this negative news and suggestions towards Bitcoin.

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