Fan Yifei, deputy governor of the People’s Bank of China, announced that the country is “quite concerned” about the financial risks associated with Tether and stablecoins.
A few months after the launch of the digital yuan, China tightens restrictions imposed on the cryptocurrency industry cryptocurrencies, . The current situation faced by the miners of bitcoin and other cryptocurrencies in the country, following the new policies of the People’s Bank of China (PboC) against mining and trading of crypto assets, forcing them to migrate to other jurisdictions. Now, it seems that the PboC is about to implement new restrictions targeting stablecoins.
fan Yifei, deputy governor of the People's Bank of China, said to CNBC that the bank is quite concerned about the financial implications and risks of the stablecoins global, such as Tether (USDT)Specifically, Yifei said that stablecoins from some commercial organizations, especially global stablecoins like Tether, may bring financial risks and challenges to the international monetary system and the payment and settlement system. At the moment, the vice governor of the bank did not give details about the new measures that the central bank will implement.
“We are still quite concerned about this issue, so we have taken some measures”, Yifei said.
China has been looking at the cryptocurrency industry, which has grown exponentially over the past year, imposing tough regulations to oversee and control its trading and mining. As stated by the PboC and the Financial Stability and Development Committee of the State Council of China in the past, the energy consumption of cryptocurrencies and potential individual risks were the reasons for banning banks and institutions from offering financial services with crypto assets, and for shutting down the operations of several crypto mining farms located in provinces such as Sichuan, Inner Mongolia, Qinghai, Xinjiang and Yunnan.
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China against the success of Tether and stablecoins
When the price of Bitcoin started to fall after reaching an all-time high in mid-April, China saw the demand for stablecoins like Tether grow massively. The reason is that many of its citizens, who trade crypto assets, use stablecoins to operate within these markets. In this scenario, Tether (USDT), although surrounded by many doubts regarding its physical reserves, is the most used stablecoin in the crypto market, followed by USD Coin (USDC).
The massive demand for USDT from Chinese users caused the stablecoin, whose value is pegged to the US dollar at a 1:1 ratio, to briefly surpass $1,02 per unit.
Source: CoinMarketCap
The success of stablecoins has worried the Chinese government, which now calls these coins “tools for speculation.” Yifei stated that Tether and existing stablecoins on the market have become threats to financial security and social stability in China.
Closing of miners and companies related to cryptocurrencies
Yifei’s recent announcements against stablecoins follow a series of measures and restrictions that the government has imposed on the crypto industry at large. A few days ago, the People’s Bank of China also ordered the closure of Beijing-based software company Beijing Qudao Cultural Development Co Ltd for allegedly being involved in trading cryptocurrencies and digital assets.
The war that the Asian power has launched against Bitcoin miners will cost it at least 40% of the hash rate it previously dominated. According to the estimates According to the Hashrate Index, all this mining power that China will lose will move to countries like the United States, Canada, Russia, among others.
Promoting the digital yuan
On the other hand, while the country is tightening restrictions on crypto assets, it is actively promoting the use of the digital yuan, its CBDC digital currency that will be officially launched next February. Yifei noted that the digital yuan system has, by invitation only, more than 10 million active users in the country.
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