As Chinese authorities attempt to regulate and suppress the cryptocurrency boom, traders have been evading regulatory oversight by using OTC trading desks. According to a May 31 report published by Bloomberg, there has been a significant uptick in OTC platform usage since Chinese authorities announced its latest crackdown earlier this month, with China tightening restrictions prohibiting financial institutions and payment companies from providing related services to cryptocurrencies.
USDT/CNY falls after the crypto crackdown in China.
Though exact volume data is hard to ascertain as Chinese OTC transactions are peer-to-peer and use third-party payment platforms, the exchange rate between China’s yuan and popular stablecoin Tether (USDT is seen as a key gauge of local crypto market sentiment — with demand for USDT increasing during market downturns. According to Bloomberg, USDT/CNY dropped by as much as 4.4% after the Chinese authorities crackdown earlier this month but has since recouped more than half the loss. The recovery suggests that peak selling may have passed as the markets are beginning to consolidate.
China is also targeting crypto miners.
Chinese traders are believed to represent a major share of the global crypto trade despite the crackdown. Analysts estimate China owned 7% of the world’s Bitcoin and accounted for roughly 80% of trading before the 2017 clampdown. The latest wave of government-imposed restrictions on the market has also seen crypto mining operations targeted as the government attempts to align its carbon neutrality goals. Several companies, including Huobi and OKEx, have halted their local mining operations and mining services for Chinese customers. As a result, Bitcoin’s mining difficulty fell by 16% on Sunday to 21 trillion – its sharpest decline this year. Mining difficulty provides an estimate for the computing power required to produce a new BTC.