The traders in China are surpassing the restrictions put down by the regulatory authorities over crypto trading in the country. Instead, the traders are doing counter trading of OTC (Over the Counter) trading desks.
The cryptocurrency traders in China seem to be overpassing the restrictions of the regulatory authorities and are using the over the counter trading of OTC trading desks. The traders took this step because Beijing attempts to regulate and suppress the cryptocurrency boom in the country.
As per the report by Bloomberg, a significant movement is observed in OTC platform usage china announced its latest crackdown earlier this month. The country has tightened its restrictions prohibiting financial institutions and payment companies from providing services related to cryptocurrencies.
China pushed the crackdown only after the unexpected surge in Bitcoin and other tokens over the past six months. This was seen after the Communist party’s concern regarding frauds, money laundering and trading losses by every investor. Hence, the traders in China are paying little or no heed to the government’s biggest crackdown on cryptocurrency trading since 2017.
Since there is no way to ascertain the exact volume of the OTC transactions as they are peer-to-peer and use third party payment platforms. The exchange rate between China’s Yuan and Tether, a popular stablecoin seen falling during the market downturns.
It is also seen that the prices of USDT have fallen to as much as 4.4% after the Communist Party crackdown earlier this month. But it has improved more than half the loss now. The recovery shows that peak selling may have passed as the markets begin to consolidate, as per the crypto data platform Feixiaohao.
One of the main concerns driving China’s crypto crackdown is capital outflows. There has been an increase in capital outflows to suppress the industry. On the other hand, OTC trading may not prove to be risky associated with typical exchanges, suggesting regulators may not be so heavy-handed in dealing with the sector.
As per the report, the Yuan leg of OTC trades takes place completely within China’s domestic financial system, so the risk of large-scale capital outflows is less.
Before the crackdown
Before the country crackdown on crypto exchanges in 2017, the investors had around 7% of the world’s Bitcoin and accounted for about 80% of trading, as per state media. The ban has gauged those figures, but investors in China are widely present in the crypto world via domestic OTC platforms. They also have their presence in offshore venues that they access using virtual private networks.
Mining difficulty surge
The latest restrictions imposed by the government has also witnessed a slump in crypto mining operations. Many companies like Huobi and OKEx have stopped their local mining operations and mining services for customers in China. Hence, Bitcoin’s mining fell by 16% on Sunday to 21 trillion. It is one of the sharpest declines this year. Mining difficulty provides an estimate for the computing power required to produce a new BTC.
The difficulty around once a fortnight is automatically adjusted by the network, responding to the level of competition among miners. The lower it falls, the less competition is there.