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Bitcoin, Ether Tumble As China's Crypto Crackdown Continues

Tyler Durden's Photo
by Tyler Durden
Monday, Jun 21, 2021 - 06:37 AM

Bitcoin, ether and most other crypto tokens tumbled to their lowest levels in more than a week Monday morning as more FUD out of China appeared to rattle traders.

To wit, bitcoin, the biggest cryptocurrency by market valuation, touched its lowest level in more than two weeks as Bloomberg reported that authorities in the Chinese city of Ya'an had promised to root out all bitcoin and ether mining operations in the area - known for its cheap hydroelectric power - in the coming months. BBG cited "a person with knowledge of the situation" as its source.

A Chinese city with abundant hydropower is stepping up action to rein in cryptocurrency mining, reviving concern that China is taking a harder stance on the industry. A Ya’an government official told at least one Bitcoin miner that the city has promised to root out all Bitcoin and Ether mining operations with a year, said a person with knowledge of the situation.

The curb appears to be widening across the province as power companies owned by the central and provincial governments in Sichuan must immediately stop supplying electricity to crypto mining projects, according to a notice issued by the province’s economic planning agency and energy administration. The State Grid Sichuan Electric Power Company has reported 26 suspected crypto mining projects to the government, according to the report. It added that city-level governments have been asked to start checks in their areas and shut down all such projects that are found.

Later in the morning, Bloomberg cited a statement the PBOC, China's central bank, which formally requested a meeting with Alipay and several local banks over providing services to virtual currency trading. The banks included ICBC, Agricultural Bank of China, China Construction Bank, Postal Savings Bank of China and Industrial Bank.

PBOC also required banks and payment institutions to step up monitoring and screening of accounts related to virtual currency exchanges and dealers.

In a hint of what might be to come, the Agriculture Bank of China, better known as AgBank (the country's third largest lender by assets) said on Monday that it planned to clamp down on cryptocurrency trading and mining activities under guidance from the PBOC, according to Reuters.

The firm said it will freeze any crypto-linked accounts as it finds them.

AgBank is the first major state bank to publicly disclose its turn away from cryptocurrencies after China's State Council last month vowed to crack down on bitcoin trading and mining activities. Reuters reported the AgBank news while Bloomberg reported about the request for meetings with AliPay and a host of banks, which included AgBank. It suggests that other, smaller banks might release similar statements in the not-too-distant future.

With the world waiting to see whether US equities will rebound, or turn lower once again with a slate of senior Fed speakers expected on Monday, at least one market strategist fears that a continued selloff in crypto might define the global de-risking this week.

"If, as I expect, the global buy-everything unwind continues this week, Bitcoin will feel those chill winds," said Jeffrey Halley, senior market analyst at Oanda Asia Pacific Pte.

Fears about a crackdown on crypto mining operations in China have been festering for weeks now thanks to a series of reports in the western business press. Some commentators have also pointed to a drop in China's btc hashrate, a measure of the total computational power dedicated to mining, has waned in recent months, a sign that China's crackdown is already having an impact.

At the same time, Beijing and the PBOC have beaten the Fed, the ECB and the rest of the world in developing a digital currency of their own, the "e-RMB", which it's reportedly planning to launch using the "coercive power" of the state to force adoption.

Other issues in the crypto space have nothing to do with China. For example, last week, the DeFi token Titanium dropped from $60 a coin to $0, a rare occurrence even in the volatile world of crypto.

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