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China’s latest move to tighten cryptocurrency regulation is not a “new development,” according to Paul Mackel, global head of FX research at HSBC.
“There’s been some messaging there for some time. This is not a new development, as far as I’m concerned, they’ve been more cautious on cryptocurrencies,” he told CNBC’s “Street Signs Asia” on Monday.
He added that Beijing’s recent attempt is not in direct conflict with the country’s intent to launch its own digital yuan, the so-called the Central Bank digital currency (CBDC) which aims to replace some cash in circulation.
“I don’t think there’s necessarily a conflict with the e-CNY whenever it will be launched, it’s a very different digital currency, so to speak,” he said, using an abbreviation for the electronic Chinese yuan.
“I think there’s probably other issues right now — the degree of speculation, volatility and what does that mean in terms of the environment. These issues may have dominated their thinking lately.”
His comments came after Chinese Vice Premier Liu He and the State Council said in a statement on Friday that tighter regulation on cryptocurrency is needed to protect the financial system.
The statement said it was necessary to “crack down on Bitcoin mining and trading behavior, and resolutely prevent the transmission of individual risks to the social field.”
Bitcoin’s price tumbled further following the statement, at the end of a volatile week. The cryptocurrency continued its sell-off on Sunday, and was trading at $35,040.30 at 1:49am E.T. — or 5.17% lower, according to Coindesk.
China’s current move isn’t new. The country’s crackdown on cryptocurrencies gathered pace in 2017 when regulators closed the country’s bitcoin exchanges.
Bobby Lee, founder and CEO of cryptocurrency wallet Ballet, doesn’t think that bitcoin will continue to tank despite Chinese regulatory pressure. In fact, he expects the cryptocurrency to surge in the coming months.
“It wouldn’t be a surprise that we see (bitcoin) rally again after we settled down from this current levels. We could very well go a $100, 000 or even higher by the summer or fall,” he said.
He also expects Chinese regulatory pressure to ease off — just like what happened in four years ago.
“Back in 2017, the highest pressure was probably in September, that’s when China announced the closure of many exchanges operating in the China market,” said Lee, who was previously the co-founder and CEO of BTC China — China’s first bitcoin exchange.
“And of course, people recall from history that after the fall, bitcoin rallied to an all-time high of $20,000 — increase over five times in price,” he added.