By Samuel Shen and Andrew Galbraith
SHANGHAI (Reuters) – China’s latest cryptocurrency salvo has resulted in a sharp sell-off in bitcoin markets, but retail traders, miners and even crypto-finance firms believe Beijing is bark is stronger than its bite.
China’s announcement on Tuesday of a stricter ban on banks and payment companies offering crypto-related services spurred a sell-off that briefly wiped $ 1 trillion from the crypto market cap.
But fears that the rules are crippling the cryptocurrency markets and mining on the Chinese mainland appear to be unfounded. Cryptocurrencies could still be bought from China on Thursday, and investment programs promising hefty returns for their extraction remained operational.
Bobby Lee, founder and CEO of Ballet, a cryptocurrency wallet app, said he believed the announcement was just an attempt by regulators to shield retail investors from volatile markets, but that it would be a challenge for banks to identify crypto related transactions.
“If you look at banking activity in China, millions if not billions of transactions happen every day. Of all this … how many are actually crypto services compared to catering or e-commerce? It’s almost unknowable, ”said Lee, former CEO of BTC China, China’s premier bitcoin exchange.
This is not the first time that China has banned crypto-related financial and payment services. Beijing issued similar bans in 2013 and 2017, though the latest expanded the range of banned services. The repeated bans highlight the challenge of closing the loopholes.
On Thursday, Reuters discovered that it is still possible for Chinese individuals to buy bitcoin and other cryptocurrencies and trade them on overseas crypto exchanges such as Binance. Yuan payments for these purchases could be made through banks or online payment platforms commonly used in over-the-counter (OTC) markets.
“If you have bitcoin or ethereum and I want to buy some, I can just send you money through the banks. Just don’t write anything like bitcoin or ethereum, ”said Mr. Li, who sells cryptocurrency on behalf of miners.
“Of course, banks have internal risk management. If the volume of transactions is too large, you could be caught, ”said Li, who declined to give his full name due to the sensitivity of the issue.
Players in China’s crypto mining industry were also not worried about the latest crackdown, again citing the difficulties regulators would have in identifying transactions.
China-based miners have the problem opposite investors, as they already have bitcoin that they have to exchange for yuan to pay their electricity costs.
Mining is big business in China, which accounts for up to 70% of the global cryptocurrency supply, by some estimates, although others say that proportion has declined in recent years.
“The Chinese government is rife from time to time, but currently it is not too difficult to convert mined coins into RMB for Chinese miners,” said Thomas Heller, commercial director of Compass Mining, using another word to refer to Chinese currency.
Although the new rules ban crypto-related investment products, these systems are still sold online.
A platform offering retail investors the ability to quadruple their money in three years by purchasing computing power for miners from a smaller cryptocurrency, Filecoin, which has grown in popularity in China, still appeared to be willing to sell. money Thursday.
Flex Yang, CEO of Babel Finance, a cryptocurrency finance company, remained optimistic.
“Bitcoin prices fell over 50% last year in March, but eventually rebounded to a new high,” Yang said.
“Over the long term, bitcoin continues to be a great asset class for portfolio managers looking for growth.”
(Reporting by Samuel Shen and Andrew Galbraith in Shanghai, additional reporting by Kevin Yao in Beijing, written by Alun John, edited by Vidya Ranganathan and Catherine Evans)