Trouble may be brewing in China for Bitcoin\u2019s raucous and divisive rally as the nation pushes ahead with a world-leading effort to create a digital version of its currency.<\/p>\n
That\u2019s because the eventual rollout of the virtual yuan could roil cryptocurrency markets if Chinese officials tighten regulations at the same time, according to Phillip Gillespie, chief executive of crypto market maker and liquidity provider B2C2 Japan, which mainly works with institutional investors.<\/p>\n
\u201cOnce a digital yuan is introduced, that\u2019s going to be one of the biggest risks in crypto,\u201d Gillespie, who previously worked in currency markets for Goldman Sachs Group Inc., said in an interview. \u201cPanic selling\u201d is possible if the new rules end up sucking liquidity from trading platforms for digital coins, he said.<\/p>\n
Central banks\u2019 power to issue virtual money and proscribe rivals is one of the key risks for the crypto sector. Chinese citizens are already banned from converting yuan to tokens but the practice continues under the table using Tether, a digital coin that claims a stable value pegged to the dollar. The money parked in Tether then gets routed to Bitcoin and other tokens.<\/p>\n
Tokyo-based Gillespie sees potential for an outright ban on Tether, which could raise the stakes for anyone minded to continue using it.<\/p>\n
A draft People\u2019s Bank of China law setting the stage for a virtual yuan includes a provision prohibiting individuals and entities from making and selling tokens. In recent days, China\u2019s Inner Mongolia banned the power-hungry practice of cryptocurrency mining.<\/p>\n
Representatives of the People\u2019s Bank of China didn\u2019t reply to a fax seeking comment on the prospect of regulatory changes. While there\u2019s no launch date yet, the PBOC is likely to be the first major central bank to issue a virtual currency after years of work on the project.<\/p>\n
Tether officials have downplayed the concern, saying that central bank digital currencies won\u2019t mean the end of stablecoins.<\/p>\n
\u201cTether\u2019s success has provided a blueprint for how a CBDC could work,\u201d said Paolo Ardoino, chief technology officer for Tether and Bitfinex, an affiliated exchange. \u201cFurthermore, CBDC\u2019s are unlikely to be available on public blockchains such as Ethereum or Bitcoin. This last mile may be left to privately-issued stablecoins.\u201d<\/p>\n
Still, Gillespie points out that Tether is \u201cthis massive amount of fuel for Bitcoin purchases\u201d and few people realize the potential for disruption. A \u201ctremendous amount of liquidity\u201d is coming from exchanges tapping Chinese demand, he added.<\/p>\n
Tether Questions
\nBitcoin surged fivefold in the past year and hit a record above $58,000 last month before dropping back about $10,000. The rally has split opinion, with some arguing a new asset class is emerging and others seeing pure gambling by retail investors and speculative pros in the Wild West of finance.<\/p>\n
Tether is an equally controversial token deep in the plumbing of the nascent cryptocurrency market. Traders use it to park money as they shift from virtual to fiat cash.<\/p>\n
More than $18 billion of Tether moved overseas from East Asian addresses over a one-year period, including spikes suggesting Chinese origin, according to an August report from Chainalysis, which analyzes the blockchain network technology underlying tokens. The report indicated citizens may be using Tether to dodge rules that limit capital transfers abroad.<\/p>\n
Questions about Tether continue to swirl. The companies behind it were banned from doing business in New York last month as part of a settlement with state officials who found that they hid losses and lied about reserves.<\/p>\n
\u2018Liquidity Shock\u2019
\nA recent report from JPMorgan Chase & Co. said there\u2019d likely be \u201ca severe liquidity shock to the broader cryptocurrency market\u201d if issues arose that affected the \u201cwillingness or ability of both domestic and foreign investors to use Tether.\u201d<\/p>\n
\u201cAll the volume goes through Tether,\u201d said Todd Morakis, co-founder of digital-finance product and service provider JST Capital. \u201cAs regulators become more and more restrictive on stablecoins, that could be very negative for the market because that could mean less liquidity.\u201d<\/p>\n
B2C2 Japan\u2019s Gillespie said Tether is \u201csuch a risky asset\u201d and a \u201cmassive liquidity shock\u201d is possible if China does ban it. \u201cWhat would happen is there\u2019s going to be massive panic selling,\u201d he said.<\/p>\n","protected":false},"excerpt":{"rendered":"
Trouble may be brewing in China for Bitcoin\u2019s raucous and divisive rally as the nation pushes ahead with a world-leading effort to create a digital version of its currency. That\u2019s because the eventual rollout of the virtual yuan could roil cryptocurrency markets if Chinese officials tighten regulations at the same time, according to Phillip Gillespie, chief executive of crypto market maker and liquidity provider B2C2 Japan, which mainly works with institutional investors. \u201cOnce a digital yuan is introduced, that\u2019s going to be one of the biggest risks in crypto,\u201d Gillespie, who previously worked in currency markets for Goldman Sachs Group […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[7],"tags":[],"class_list":["post-798114","post","type-post","status-publish","format-standard","hentry","category-it-2"],"acf":[],"_links":{"self":[{"href":"https:\/\/telecomlive.in\/web\/wp-json\/wp\/v2\/posts\/798114","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/telecomlive.in\/web\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/telecomlive.in\/web\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/telecomlive.in\/web\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/telecomlive.in\/web\/wp-json\/wp\/v2\/comments?post=798114"}],"version-history":[{"count":0,"href":"https:\/\/telecomlive.in\/web\/wp-json\/wp\/v2\/posts\/798114\/revisions"}],"wp:attachment":[{"href":"https:\/\/telecomlive.in\/web\/wp-json\/wp\/v2\/media?parent=798114"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/telecomlive.in\/web\/wp-json\/wp\/v2\/categories?post=798114"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/telecomlive.in\/web\/wp-json\/wp\/v2\/tags?post=798114"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}