Market maker Phillip Gillespie warns that China’s push to launch the digital yuan may not bode well for the future of Bitcoin and other cryptocurrencies.
The chief executive of crypto market maker and liquidity provider B2C2 Japan tells Bloomberg that once China releases a central bank digital currency (CBDC), the country may also clamp down on the cryptocurrency space.
“Once a digital yuan is introduced, that’s going to be one of the biggest risks in crypto.”
Gillespie says that new regulatory measures can disrupt the “tremendous amount of liquidity” that’s coming from the Chinese market as he sees the possibility that Tether (USDT) could be banned in the region’s crypto marketplace.
Converting yuans to tokens is already prohibited in China, but citizens use the dollar-pegged stablecoin Tether as a work-around to trade Bitcoin (BTC) and other digital currencies.
Gillespie thinks the re-routing could end soon while sounding the alarm that a massive liquidity shock could happen if China bans the use of USDT.
“What would happen is there’s going to be massive panic selling.”
Meanwhile, Tether CTO Paolo Ardoino downplays the potential effect of CBDCs on stablecoins.
“Tether’s success has provided a blueprint for how a CBDC could work. Furthermore, CBDCs are unlikely to be available on public blockchains such as Ethereum or Bitcoin. This last mile may be left to privately-issued stablecoins.”
In October, China’s electronic currency hit a milestone after moving 2 billion yuan or $299 million in four million separate transactions.