As Beijing tries to regulate and suppress the cryptocurrency boom, Chinese traders have circumvented regulatory restrictions by using over-the-counter (OTC) trading platforms.
According to a report released by Bloomberg on May 31st Since China announced its last offensive earlier this month, the use of OTC platforms has increased significantly. Tightened restrictions prohibit financial institutions and payment companies from providing services related to cryptocurrency.
Although it is difficult to get accurate volume data because Chinese OTC transactions are peer-to-peer and use third-party payment platforms, The exchange rate between the Chinese yuan and the popular stablecoin tether (USDT is considered a key indicator of sentiment in the local cryptocurrency market; demand for USDT has increased sharply during the market downturn.
According to Bloomberg USDT / CNY fell 4.4% earlier this month following the Communist Party’s actions, but has since made up more than half of the loss. The recovery suggests that as markets consolidate, the peak sales may be over.
One of the problems driving the crackdown on cryptocurrencies in China is the outflow of capitalThis was seen as an incentive for the recent repression in the sector. Bloomberg speculated that OTC trading doesn’t carry the same capital flight risks associated with typical exchanges, suggesting that regulators may not be as tough on the sector.
“Since the yuan part of the operations [OTC] it is carried out entirely in the national financial system of China, The risk of large capital outflows is low, “the report said.
China’s shift to OTC markets mirrors the situation in late 2017, when the state first imposed a ban on the exchange of cryptocurrencies. It is believed that despite the practice, Chinese traders continue to constitute a significant part of the global cryptocurrency trade Analysts estimate that China owned 7% of the world’s bitcoin and accounted for around 80% of its trade before the 2017 crackdown.
The recent wave of government-imposed restrictions has also brought cryptocurrency mining operations to the fore.. Several companies such as Huobi and OKEx have suspended their local mining operations and mining services for Chinese customers.
As a result, Bitcoin mining difficulty fell 16% to 21 trillion on Sunday, the biggest drop this year. The Mining Difficulty provides an estimate of the computing power required to produce new BTCs.
The network automatically adjusts the level of difficulty every two weeks according to the competition between the miners. The lower it is, the less competition there is, suggesting that many have already turned their gear off.