Intensified Sell-Off Stems USDT Depreciation in China

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  • The quotes for trading USDT against Chinese yuan on OTC markets like Huobi have dropped below 6.2 yuan per token.
  • This represents a negative premium of over 4%.
  • Earlier, the quotes on Chinese exchanges were above 6.37 yuan per USDT.

Following the People’s Bank of China’s move to ban all crypto transactions, a new wave of FUD hit the market.

On September 24, in an act to further intensify its clampdown on cryptocurrencies, the PBoC announced that all services that allow the exchange of fiat currencies and digital assets are now considered illegal. As per the announcement, crypto exchanges, even those located abroad, are also banned from offering crypto derivatives trading to Chinese residents.

The notice said that “recently, virtual currency trading hype activities have risen, disrupting economic and financial order, breeding illegal and criminal activities such as gambling, illegal fundraising, fraud, pyramid schemes, and money laundering.”

USDT Sell-Off Intensifies

One day after China’s renewed measures to toughen the crackdown on cryptocurrencies, the quotes for trading USDT against Chinese yuan on over-the-counter markets like Huobi, OKEx, and Binance dropped below 6.2 yuan per token.

For context, one USD is worth about 6.46 Chinese yuan, as per data by Morningstar. Since USDT is a stablecoin pegged to USD, it should also be worth 6.46 Chinese yuan. However, quotes are currently below 6.2 yuan per USDT on crypto exchanges, representing a negative premium of over 4%.

Exploiting the uncertain market status, some traders are even posting quotes for 6.12 and 6.11 yuan per USDT. Nevertheless, data reveals that prior to this, the quotes on Chinese exchanges were above 6.37 yuan per USDT.

Huobi to Close All China User Accounts

Among the top three Chinese exchanges, Huobi has become the first exchange to react following China’s latest actions. On September 26, the exchange announced that it aims to suspend all China user accounts later this year. The exchange asserted that it has already halted the registration process for new users in China. Huobi said:

Huobi Global will gradually retire existing Mainland China user accounts by 24:00 (UTC+8) on Dec 31, 2021, and ensure the safety of users’ assets. We will inform users of the specific arrangements and details through official announcements, e-mails, text messages, etc.

HT, the exchange token of Huobi, was trading above $12 on September 24, the day China announced the new measures. However, as of now, the coin is trading at around $7.4, as per data by CoinMarkerCap. This represents a drop of around 40% in just three days.

China’s first clampdown on cryptocurrencies started back in 2013, when the country ordered banks to deny money coming from cryptocurrency exchanges. Since then, the country has reiterated its crypto ban so much that it is almost impossible to keep a precise record of all the crackdowns.

Most notably, China announced a crackdown on Bitcoin and crypto mining in late May this year. At the time, it was perceived that the news was just a reiteration of old policies. However, by June it was clear that this time around the country is determined to halt crypto mining.