Risk assets fell on Thursday as China’s second rate cut in a week raised concerns of instability in the world’s second-largest economy.

Bitcoin (BTC)the leading cryptocurrency by market cap, is down nearly 2% since midnight UTC to around $64,000 and ether (ETH) fell more than 5%, dragging the broader altcoin market lower. The CoinDesk 20 Index (CD20), a measure of the broader cryptocurrency market, lost 4.6% in 24 hours.

In equity markets, Germany’s DAX, France’s CAC and the euro zone’s Euro Stoxx 50 all fell more than 1.5%, and futures linked to the tech-heavy Nasdaq 100 were down slightly after the index’s 3% drop on Wednesday, according to the data source. Investing.com.

On Thursday morning, the People’s Bank of China (PBoC) announced a surprise, cut outside the schedule in its one-year medium-term lending rate to 2.3% from 2.5%, injecting 200 billion yuan ($27.5 billion) of liquidity into the market. That is the biggest reduction since 2020.

The movement, together with similar reductions in other lending rates earlier this week shows the urgency among policymakers to sustain growth after their recent third plenary offered little hope of a boost. Data released earlier this month showed China’s economy expanded 4.7% in the second quarter at an annualized pace, much weaker than the 5.1% estimated and slower than the 5.3% in the first quarter.

“Equity futures are flat after yesterday’s bloody session that shook sentiment across asset classes,” Ilan Solot, senior global strategist at Marex Solutions, said in a note shared with CoinDesk. “The PBoC’s decision to cut rates in a surprise move has only added to the sense of panic.” Marex Solutions, a division of global financial platform Marex, specializes in creating and distributing custom derivatives products and issuing structured products tied to cryptocurrencies.

Solot noted the continued “steepening of the US Treasury yield curve” as a threat to risk assets including cryptocurrencies, echoing CoinDesk Reports since the beginning of this month.

The yield curve steepens when the difference between longer-duration and shorter-duration bond yields widens. This month, the spread between 10-year and two-year Treasury yields widened by 20 basis points to -0.12 basis points (bps), mainly due to stickier 10-year yields.

“For me, the biggest concern is the shape of the US yield curve, which continues to steepen. The 2- and 10-year curve is not only -12 bps inverted, compared to -50 bps last month. The recent moves have been led by the rise in back-end [10y] yields and lower-than-expected decline in yields,” Solot said.

That’s a sign that markets expect the Fed to cut rates but see tighter inflation and expansionary fiscal policy as growing risks, Solot said.

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Low liquidity, regulatory uncertainty and speculative behavior contribute to inefficiency in crypto markets. But systematic approaches, including momentum indices, can reduce risks for investors, says Gregory Mall, head of investment solutions at AMINA Bank.

Low liquidity, regulatory uncertainty and speculative behavior contribute to inefficiency in crypto markets. But systematic approaches, including momentum indices, can reduce risks for investors, says Gregory Mall, head of investment solutions at AMINA Bank.

Low liquidity, regulatory uncertainty and speculative behavior contribute to inefficiency in crypto markets. But systematic approaches, including momentum indices, can reduce risks for investors, says Gregory Mall, head of investment solutions at AMINA Bank.

July 24, 2024, 5:30 p.m.

Updated July 24, 2024, 5:35 p.m.

(Benjamin Cheng/Unsplash)

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“The policy position is how one consults with relevant stakeholders, so it’s to go out in public and say here’s a discussion paper, these are the issues and then stakeholders will give their views,” said Seth, who is the Secretary for Economic Affairs. “A cross-ministerial group is currently looking at a broader policy on cryptocurrencies. We hope to release the discussion paper before September.”

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The Russian State Duma has approved a bill that legalizes Bitcoin mining and allowing the use of cryptocurrencies for international trade.

The bill, which was first introduced a few years ago, is due to come into effect on September 1, pending final approval by the federation.

Based on local reports, the vote count from the session was conclusive, with 404 votes in favor, representing 89.8 percent of the total. No member voted against or abstained from voting.

The new legislation was designed to address challenges faced by Russian banks due to regulatory restrictions and international sanctions. The sanctions have significantly disrupted Russia’s trade relations with key partners including China, India, the United Arab Emirates and Turkey, as local banks have become increasingly cautious under Western pressure.

Mining regulation

The bill establishes a regulatory framework to oversee cryptocurrency mining activities, ensure compliance with tax regulations, and prevent illicit operations. A key feature of the bill is the authorization of Bitcoin mining.

Drafted by MP Anatoly Aksakov and other lawmakers, the legislation mandates that mining activities be regulated by the government and the Bank of Russia, with a federal authority ensuring compliance. The move aims to bring mining activities out of the shadows and ensure that income is declared and taxes paid.

In addition to regulating mining, the bill allows the sale of crypto mined without using Russian information infrastructure, exempting such transactions from domestic currency regulation laws. However, the use of cryptocurrencies for domestic payments remains prohibited in Russia.

The legislation also includes a ban on advertising cryptocurrencies, with the aim of controlling the spread of the use of digital currency in the country.

Growing acceptance

While cryptocurrency remains banned for domestic payments, the bill marks a notable shift in Russia’s approach to digital assets and currencies. The legislation aims to enhance Russia’s trade relations and challenge global regulatory norms.

Russia is also considering officialization legalization of stablecoins for international transactions to simplify cross-border payments for Russian companies amid ongoing sanctions. The central bank is actively discussing proposals to allow the use of these crypto assets, which are pegged to stablecoins or assets such as the US dollar or gold, making them less volatile than other cryptocurrencies.

However, the Russian Ministry of Finance recently proposed allowing traditional exchanges to handle digital asset trading for selected investors. A draft government response outlined the possibility of creating special regulations for “conducting organized trading in digital currency, recognized as a commodity, on the basis of an exchange license or a trading system license.”

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