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S&P downgrades Tether’s assets to lowest level

Rating agency cites rising exposure to high-risk assets and lack of disclosures

Tether’s ability to maintain its peg to the US dollar has been called into question by S&P Global Ratings, which downgraded the stablecoin operator’s reserves to its lowest measure due to rising exposure to high-risk assets.

In a note on Wednesday, the rating agency downgraded its assessment of Tether’s assets to “weak” from “constrained”. It also flagged “an increase in high-risk assets” backing the stablecoin, with corporate bonds, precious metals, bitcoin and secured loans accounting for 24 per cent of total reserves at the end of September, up from 17 per cent a year ago.

Tether runs USDT — by far the world’s biggest stablecoin with about $184bn in circulation — a form of digital cash outside the banking system that is pegged to the dollar and mostly backed by high-quality securities such as US Treasuries. 

The rating agency warned that the company has “limited transparency on reserve management and risk appetite, lack of a robust regulatory framework [and] no asset segregation to protect against the issuer’s insolvency”.

It also cited Tether’s lack of disclosures regarding its custodians, bank account providers and counterparties, as well as how it decides which risky assets to buy and what to do if the value of some assets drops significantly. 

“A decline in the price of bitcoin or the value of other higher-risk assets, could therefore reduce collateral coverage and result in USDT becoming under-collateralised,” S&P analysts wrote. They added that the rising share of risky assets exposed the token’s reserves “to greater market fluctuations”.

US commerce secretary Howard Lutnick has previously said Cantor Fitzgerald, of which he was formerly chief executive, custodies Tether’s Treasuries, but S&P said “reports on the reserve still do not disclose information on the custodians, counterparties or bank account providers of the assets.”

Tether said it “strongly disagrees with the characterisation presented in the report” and said the stablecoin “has consistently maintained full resilience through banking crises, exchange failures, liquidity shocks and extreme market volatility.”

Tether added that it “leads the industry in transparent reserve reporting, publishing real-time data and quarterly independent attestations since 2021 — standards that exceed those of many regulated financial institutions”.

In 2022 Tether failed to maintain its peg with the dollar after coming under heavy selling pressure. In an interview at the time, Paolo Ardoino, now the company’s CEO, declined to provide details about the hoard of government bonds kept in reserve, as he did not “want to give our secret sauce”.

The broader crypto market has tumbled in recent weeks as investors concerned about tech stock valuations and the trajectory of US interest rates have trimmed their positions in risky assets.

Bitcoin has fallen about 30 per cent since its latest peak in early October, leaving the value of the digital token down 6 per cent since the start of the year, despite the Trump administration’s crypto-friendly policies. 

Tether is one of the world’s biggest buyers of US Treasuries, which comprise 75 per cent of its collateral, a decrease from 81 per cent, according to the rating agency’s last review. It made $10.1bn in net profits this year to September. The company largely makes money by pocketing the interest that it earns from holding Treasuries.

In September the company entered into talks to raise as much as $20bn in a private funding round that would value the El Salvador-based group at half a trillion dollars.

Since being founded 11 years ago, Tether has been dogged by concerns over its poor disclosures and a lack of transparency. Ardoino has previously said that hiring an auditor was a top priority, but the company still puts out attestations — reviewed by BDO Italia — instead of full audits of the reserves backing its stablecoin.

Crypto firm that did a complicated deal with the Trumps warns it may face lawsuits and regulatory probes.

The Takeaway

Eric Trump and Donald Trump Jr. rang the bell at Nasdaq’s New York headquarters in August to celebrate the announcement of a deal that could have netted the family a windfall of hundreds of millions of dollars.

The president’s oldest sons were combining their crypto startup, World Liberty Financial, with a publicly traded Canadian company, Alt5 Sigma. “We’re going to change finance forever,” Eric Trump said at the ceremony.

At Alt5 Sigma’s offices in Montreal and Toronto, employees live streamed the flashy event. Alongside the Trump brothers were about two dozen people cheering the market open in front of a sign with the two companies’ logos. Missing from the scene were any representatives of Alt5 Sigma, even the CEO. A World Liberty spokesperson said: “other members of the Alt5 team were unable to attend.”

Troubles with the combined company quickly surfaced. Weeks later, Alt5 suspended its CEO pending the outcome of an investigation by a new outside law firm, and the company warned staff it would likely face litigation and regulatory investigations, according to a letter from the firm distributed to employees. Several other senior executives have quit or have been fired.

In the three months since, Alt5 Sigma’s shares have fallen 75% and the value of the Trumps’ crypto currency, $WLFI, has fallen by nearly half. The company also disclosed that it had been convicted of money laundering in Rwanda.

Alt5 told its staff on Sept. 4, without providing an explanation, about the suspension of its CEO. It didn’t publicly disclose the suspension until it posted a securities filing on Oct. 22.

The Trumps and World Liberty Financial wouldn’t comment on the share price declines or on Alt5 Sigma’s legal issues. The recent personnel changes at Alt5 Sigma “reflect an ongoing effort by Alt5’s leadership to ensure the company has an appropriate operating team in place,” the spokesperson said.

Alt5 Sigma investors are furious. “I feel betrayed,” said Matt Chipman, a Los Angeles–based shareholder in the company. He said he had been stonewalled in his efforts to find out why the deal happened and what the company’s plans are.

Trump Windfall

The Trump-Alt5 deal comprised two parts. Alt5 Sigma issued shares and warrants to World Liberty Financial in exchange for $750 million worth of $WLFI cryptocurrency created by the Trump family’s company. At the same time, Alt5 Sigma sold 100 million of its shares to other investors, raising $750 million. The company said it would use the money it raised to buy more $WLFI tokens on the open market.

The arrangement gave World Liberty Financial a public stock listing. The Trump family was aiming to profit from investor enthusiasm for digital asset treasury stocks—publicly traded companies whose sole purpose is to buy and hold crypto coins. The best known of these is Michael Saylor’s Strategy, whose shares soared after it loaded up on bitcoin.

Transactions like these are often done between private companies like World Liberty Financial and shell companies that have stock listings but no operating business. Alt5 Sigma did have an operating business, and troubles there are complicating the deal.

Founded by Canadian entrepreneurs in 2018, Alt5 Sigma built a trading platform and payment system that allowed customers to buy and sell crypto and to use digital coins to buy goods from e-commerce websites or gaming platforms. It processed roughly $1 billion worth of transactions in 2023, according to company records and people familiar with the figures.

As part of the deal, World Liberty co-founder Zach Witkoff—the son of President Donald Trump’s Middle East envoy, Steve Witkoff—was appointed Alt5’s chair. He said the deal would boost Alt5 Sigma’s original business by allowing it to issue cryptocurrencies that customers could use to make purchases.

“They were missing a big spotlight,” Witkoff said. “ALTS [the company’s Nasdaq ticker] is an incredible company with incredible technology. We’re really going to shine a light on that with this transaction.”

But Alt5’s bet on the Trump cryptocurrency turned out to be awful. The company’s stock is now more closely tied to the cryptocurrency than to its original business. Stocks that hold cryptocurrencies peaked in the summer and have tumbled since, with many falling by half or more. Alt5 Sigma’s market capitalization has sunk from around $700 million before the deal to below $200 million.

Chipman, the Alt5 Sigma investor, said he hopes the situation improves. “I hope it wasn’t just a money grab for the Trump family. This has been a nightmare scenario in the last three months,” he said.

Joining the Trump Orbit

Alt5 Sigma got its stock market listing last year through its merger with a biotech company, JanOne. The combined company named Canadian entrepreneur Peter Tassiopoulos as CEO.

Tassiopoulos steered Alt5 Sigma into the orbit of some conservative-leaning companies that have sprung up in recent years. In February, Alt5 Sigma struck an agreement to partner with Oklahoma-based Old Glory Bank, co-founded by Trump’s former secretary of housing and urban development, Ben Carson. The bank claims to be the “first chartered bank to openly support America, the flag, freedom, the military, first responders, and most importantly, the hard-working people who make America great.”

Old Glory raised fresh capital by selling shares in itself to small investors and allowing them to pay in crypto, including with a memecoin created by President Donald Trump. Alt5 Sigma provided the technology to support those transactions. Potential investors in the bank were “paying in Trump coin for their shares,” Tassiopoulos told an interviewer at a Dubai blockchain conference in February.

At Tassipoulos’ urging, the Alt5 board appointed a new director: Ron Pitters, a fintech executive who was previously head of securities and digital assets at Axos, a bank that became a big lender to Donald Trump after many other lenders cut him off following the 2020 election.

Earlier this year, the Trumps’ World Liberty Financial was searching for a partner to help it issue crypto-enabled credit and debit cards. Alt5 owned a subsidiary that could do just that. The two firms began discussing a possible project, former Alt5 employees said.

Those discussions didn’t pan out, but Tassiopoulos and the World Liberty team soon eyed a more adventurous opportunity: having Alt5 Sigma buy up the Trump’s cryptocurrency to join the burgeoning ranks of stocks that hold crypto. That led to the announcement at the Nasdaq.

World Liberty’s website says the Trump family owns 22.5 billion $WLFI tokens and is entitled to receive 75% of the proceeds from sales of the cryptocurrency. That implies the first part of the deal should have netted the Trumps roughly $550 million. The second part, Alt5 Sigma’s purchase of tokens on the open market, could have boosted the value of $WLFI. The cryptocurrency was priced at 20 cents per token on completion of the deal.

Since then, however, the price has dropped as low as 11 cents, likely reducing the Trump family’s gains. As of Tuesday, the token had recovered to 16 cents.

Alt5’s stock has also been on a roller coaster since the merger. Before the market opened the day of the announcement, it rallied from below $9 a share to just under $20 per share. When news hit that the company was selling shares at $7.50 each, the stock fell back to that price.

After the deal, a sense of unease swept over the roughly two dozen Alt5 employees, mainly based in Canada. Tassiopoulos offered differing accounts of the value of the World Liberty token and struggled to describe how it would draw investor interest, multiple former employees said. And while Alt5 historically held monthly companywide town hall meetings, Pitters informed staff that meetings would take place quarterly, putting the next one potentially in December.

In late August, Alt5 disclosed in a filing that, contrary to the plan, Eric Trump would no longer be taking a board seat. Nasdaq had warned the company that to comply with its listing rules regarding takeovers, Eric Trump would have to be designated as a board observer.

“Eric is not on the board, nor has he ever been on the board,” a Trump Organization spokesperson said.

Alt5 Sigma’s legal issues remain unclear. In the late August filing, the company said that the board had just learned about the Rwandan court decision that found Alt5 criminally liable for money laundering. The decision was handed down in May and the company appealed it in June, a person briefed on the matter said.

The filing said the Rwanda court decision and other matters “were not previously disclosed to the board” at the time of the World Liberty deal. The court matter related to a bank fraud perpetrated on the company by a fictitious money services business the company had partnered with in 2023.

Alt5 had alerted Rwandan authorities to the existence of the fictitious business in an attempt to retrieve the $3.5 million it had lost. Two former employees said documents related to the court case were available to World Liberty in a data room set up before the two firms made their deal. A World Liberty spokesperson said this was “categorically false.” (Data rooms are places where potential acquirers of a business can get access to detailed information about it.)

On Sept. 4, the company sent a memo to its staff saying that Tassiopoulos and Alt5’s chief revenue officer had been suspended pending the outcome of an investigation led by a special committee, according to an email viewed by The Information.

Alt5 didn’t publicly disclose the suspensions until it issued a securities filing on Oct. 22. It told shareholders that Tassiopoulos had been suspended on Oct. 16—six weeks after announcing it to employees. It is unclear if the special committee investigation is connected to the Rwandan conviction.

Law firm Thompson Hine sent a letter to employees on August 29 that said the special committee would investigate financial matters, asset transfers, payments, contracts and the company’s accounting, recordkeeping and preparation of financial statements, among other things. “Although no lawsuit has yet been filed against the company relating to the matters, litigation, regulatory investigations and other proceedings are reasonably anticipated,” the letter said.

The company declined to comment on legal matters.

Executives from Trump’s World Liberty were initially optimistic about the deal. Witkoff, Alt5 Sigma’s chair, said on a small podcast about blockchains in August that the company plans to acquire “a lot more” World Liberty tokens in the future. “You know, I think clearly it’s good for the ecosystem to have, you know, a major buyer that’s constantly in the market buying tokens and standing behind it,” he said.

Witkoff and the Trumps haven’t mentioned the combined company publicly since it hit the rocks.

Online gambling operators hit with steep tax rises

High street betting shops and fruit machines spared from tax raid as bingo industry enjoys a cut

Rachel Reeves hit online gambling operators with steep tax rises but spared high street betting shops and fruit machines, sparking some relief for a sector that was braced for the worst ahead of the Budget.

The chancellor said she had targeted her tax rises at the online sector because it is “associated with the highest levels of harm”.

The Office for Budget Responsibility estimated that the additional gambling taxes would raise £1.1bn by the end of this parliament, even as it acknowledged that some of the expected tax yield would be reduced due to “potential substitution to the illicit market”.

The new measures include increasing remote gaming duty, which applies to online casino and roulette games, from 21 per cent to 40 per cent.

Reeves also announced that the levy for remote betting would be raised to 25 per cent from April 2027, while the rate for betting at bricks-and-mortar shops would be held at the current level of 15 per cent. 

The chancellor did not announce any increase in machine games duty, which applies to the flashing machines often found in casinos and bookmakers, defying repeated calls from campaigners, including former prime minister Gordon Brown, to deliver a steep increase.

That move will be a relief to the pub sector. JD Wetherspoon pulled in £73mn — more than 3 per cent of its total revenues — from its fruit machines in the year to July. 

The bingo industry, meanwhile, enjoyed a tax cut, as Reeves said the 10 per cent duty paid by operators would be abolished from next April. 

Miles Baron, chief executive of the Bingo Association, said the move was “transformative” and reflected a “clear recognition of the unique community value we provide”.  

The tax rises on the gambling sector, which were widely expected ahead of Wednesday’s Budget, will not be felt evenly across the market, said Adam Rivers, a managing director at consultancy Alvarez & Marsal.

Companies with larger international revenue streams, or a bigger retail presence, could be in a position to hold their prices lower in order to squeeze the competition.

Pravin Gondhale, an analyst at Barclays, said the new levies had already been partly priced in to stock valuations, paving the way for some market relief on Wednesday.

Shares in Ladbrokes owner Entain closed up 3.4 per cent, Paddy Power owner Flutter rose 2.5 per cent.

Casino operator Rank Group, which owns Mecca Bingo, added 10 per cent, even as it forecast that new taxes and higher staff costs arising from the Budget would cause a £45.5mn hit to profits, despite a £6mn boost from the abolition of bingo duty.

Entain said the new levies would cost an extra £200mn annually, but that it could mitigate about a quarter of the impact by reducing marketing and promotions.

But Evoke, owner of William Hill and 888, was down 18 per cent, with investors wary that the company’s heavy UK exposure and high debt level made it less able to absorb the new measures.

Evoke withdrew its medium-term financial targets as it forecast that, without mitigation, the betting taxes introduced in Reeves’ Budget would increase its costs by around £125mn from 2027.

“We will begin immediately on executing our mitigation plans, which involve a significant reduction in investment into the UK, and, very regrettably, the likely need for thousands of jobs to be cut up and down the country,” said chief executive Per Widerström.

Gambling companies have repeatedly warned that higher taxes will lead to worse odds and push bettors into the illicit market. Grainne Hurst, chief executive of the Betting and Gaming Council, said the tax increases on online gambling were “a massive win for the incredibly harmful, unsafe, unregulated gambling black market”. 

Joanne Whittaker, chief executive of bookmaker Betfred, said UK gamblers were “extremely price-sensitive” and would seek “better value with an offshore operator that isn’t paying the same tax and duties”.

Trafigura star trader plotted fake nickel scheme, Prateek Gupta tells court

Indian tycoon defending $600mn lawsuit brought by commodities house in London

Indian business tycoon Prateek Gupta has told a court that Trafigura’s former star nickel trader orchestrated a scheme that involved the shipment of huge volumes of fake nickel cargoes.

Gupta, testifying in a London court on Wednesday via video link from Dubai, claimed that Socrates Economou had in 2019 proposed an arrangement that involved the transportation of purported nickel shipments that would in fact contain various low-value materials such as iron briquettes.

It was Gupta’s first day of testimony as defendant to a $600mn lawsuit brought by Trafigura, which alleges that it had been the victim of a “systemic fraud” perpetrated by Gupta and companies he controlled. The five-week trial in London’s High Court began earlier this month.

Lawyers for Dubai-based Gupta argue that the trading house was in on the scheme, which they allege was profitable for Trafigura because it earned interest for financing the cargoes while they were being transported.  

Economou, Trafigura’s former head of nickel trading, has denied having had any knowledge of the fraud at the time. “I am insulted by the suggestion that I would sacrifice my integrity and jeopardise my career to devise and propose such a plan,” he said in a witness statement. 

Asked on Wednesday by Trafigura’s lawyer, Nathan Pillow KC, whether he accepted that the proposed arrangement would amount to fraud, Gupta said: “That’s what was proposed by them . . . I was just following instructions.” 

When pushed about whether he understood in 2019 that such a proposal would amount to a “fraudulent or deceptive arrangement”, Gupta said “no”.

Gupta said he had not been aware of the “operational modalities” of how the proposed scheme would work. 

He claimed instead that Economou and former Trafigura employee Harshdeep Bhatia would discuss how to structure the arrangement with colleagues. Gupta said Bhatia later told him the scheme had been approved, noting that “at that stage he [Bhatia] was reporting to the CEO”, who at the time was Jeremy Weir.

Even so, Gupta told the court, the two former Trafigura employees had given him “instructions” to keep the arrangement quiet and “only to discuss this with specific people”.

Asked by Pillow whether he had believed at the time that Trafigura was “going to deceive the [London Metal Exchange]” by falsely presenting cargoes as pure nickel, Gupta said “potentially, yes.”

That would mean being aware of “fraud” said Pillow, to which Gupta replied: “Not by me.” 

During testimony in the high-profile case this month, Trafigura claimed it made just $10mn from selling the contents of the so-called nickel cargoes that it bought for $500mn from Gupta.

The court heard on Monday that concerns about the commercial arrangement had been raised internally by Trafigura’s trade finance team before the fraud was discovered.

The concerns raised included that journey times for the purported nickel shipments appeared to be unusually lengthy, while Gupta’s company was paying Trafigura a relatively high interest rate for financing the cargoes, the court heard. 

“Main concern is we have become the bank of this company,” given the large sums being extended to Gupta’s company by Trafigura for the shipments, wrote Thibaut Barthelme, a member of the trade finance desk, in an email in 2020.

The trial continues.

FCA accuses Bobosher Sharipov of passing confidential information to ex-flatmate on GCP takeover

A former employee of US investment bank Jefferies International has been charged with insider trading by the UK regulator for allegedly telling a friend about a takeover of a London-listed company that he was advising.

The Financial Conduct Authority said on Wednesday it had started criminal proceedings against Bobosher Sharipov, a former banker at Jefferies, and his “close friend and business associate” Bekzod Avazov.

Sharipov was working at Jefferies when he advised GCP Student Living on a planned £969mn takeover of the London-listed student accommodation investment fund by US private capital group Blackstone and Dutch pension fund APG in 2021. 

The former Jefferies banker allegedly passed on confidential details about the takeover to Avazov, who is then accused of purchasing shares in GCP and making spread bets that made almost £70,000 in profit when its takeover was announced, the FCA said. 

The watchdog was alerted to what it claimed were suspicious trades in GCP shares by Avazov “given the timing and profit” of the purchases. It then analysed public records to find his close relationship to Sharipov. The two men were former colleagues and flatmates, it said.

“We believe that Mr Sharipov took advantage of his position so he and his friend Mr Avazov could benefit through committing crime and gaming the system,” said Steve Smart, FCA executive director of enforcement and market oversight.

“The integrity and cleanliness of our markets rely on trust,” he said. “It is right that this case is heard by the courts.” 

Insider trading carries a maximum seven-year jail sentence. The FCA has issued general warnings this year to bankers about leaks, which have come alongside an increase in unusual trading activity.

Nearly four in 10 UK takeovers were reported in the media before their announcement in the 14 months to May this year, according to a Financial Times freedom of information request to the FCA.

The two men appeared at Westminster Magistrates Court on Wednesday and neither entered a plea, the FCA said. The case has been assigned to Southwark Crown Court.

The regulator said Jefferies had co-operated fully with the investigation. Sharipov previously also worked at Swiss bank UBS, according to his entry in the FCA register.

A lawyer for Sharipov did not immediately respond to a request for comment. A lawyer for Avazov could not immediately be reached. Jefferies declined to comment.

Chinese start-up LandSpace is set to launch its first reusable rocket on Saturday. If it succeeds, it will give China’s space sector a major boost

On Saturday, the Beijing-based start-up LandSpace reportedly plans to conduct the maiden launch of its Zhuque-3 rocket – a reusable launch vehicle that could significantly boost China’s space industry by lowering the cost of lifting equipment such as satellites into orbit.

The prospect of China mastering reusable rockets – a technology pioneered by US-based SpaceX – has attracted significant attention from aerospace experts, and even drew comment from SpaceX CEO Elon Musk last month.

Beyond the strategic importance of reusable carrier rockets, a successful launch would also represent a milestone for China’s commercial space sector, which has rapidly grown in recent years as Beijing bids to rival Washington in space technology.

In this explainer, the Post breaks down the current state of China’s commercial space industry, how close it is to rolling out reusable rockets, and how the technology would benefit the country’s space programme.

How far has China’s commercial space industry come?

China’s commercial space sector has grown at a rapid pace over the past few years. As of Monday, the country had more than 90,000 space-related companies, nearly 60 per cent of which were founded in the past three years, according to the Chinese corporate database Qichacha.

The industry surpassed a market value of 1 trillion yuan (US$141 billion) in 2020 and has since maintained steady growth, with a compound annual growth rate of around 22 per cent, according to an analysis by the China Centre for Information Industry Development, as cited by state news agency Xinhua.

The centre – which is under China’s Ministry of Industry and Information Technology – projected that China’s commercial space industry would reach a market value of 2.8 trillion yuan in 2025.

Why is the industry attracting attention at the moment?

Eyes are now turning to the maiden launch of the Zhuque-3 rocket, which is scheduled for Saturday, according to financial news agency Cailian Press.

The LandSpace launch vehicle – one of several Chinese reusable rockets under development – could reduce the cost of lifting equipment into space, helping China to accelerate the deployment of large-scale low-orbit satellite constellations.

Musk appears to be impressed. In a social media post discussing several Chinese reusable rocket models – including Zhuque-3 – in late October, he said the Chinese companies had “added aspects of Starship” – SpaceX’s most powerful launch vehicle – to a “Falcon 9 architecture”, referring to one of the company’s earlier reusable rockets.

The designs had the potential to “beat Falcon 9”, Musk said, while adding that Starship was “in another league”.

In a report published on Sunday, Citic Securities noted that Chinese companies had already launched liquid-fuel rockets comparable to SpaceX’s Falcon 1. The next phase would see them develop reusable medium-lift launch vehicles similar to the Falcon 9.

These larger rockets would be used to deploy GuoWang and Qianfan – Chinese satellite internet constellations aiming to provide an alternative to Elon Musk’s Starlink – and computing-power satellites, “potentially overcoming bottlenecks in payload capacity and launch costs”, the report added.

What other recent moves are propelling the industry’s development?

The Chinese government is also moving to create a more favourable environment for the development of the country’s satellite communications sector.

On Saturday, the Ministry of Industry and Information Technology announced the launch of commercial trial operations for satellite-based Internet of Things services at the China 5G+ Industrial Internet Conference in the central Hubei province.

Meanwhile, the State Administration of Science, Technology and Industry for National Defence has published a recruitment notice that included an “aerospace regulatory post” in the newly created commercial space department – indicating a new department has been set up for the industry.

“The establishment of the commercial space department will effectively consolidate related functions that were previously scattered across multiple agencies, allowing satellite industry work to be coordinated at a higher level,” Citic Securities said in its report.

“The efficiency of key processes, such as commercial space launch approvals and the issuance of satellite operating licences, is also expected to improve further,” the report added.

Ambitious programme also encourages private firms to pioneer innovation in areas such as reusable rockets and space debris monitoring

China’s space agency has released an action plan to take its commercial space sector worldwide, pledging to help integrate commercial projects into its international cooperation agenda.

The ambitious plan could challenge a number of US laws and government regulations aiming to curb the expansion of China’s space industry on the global stage.

On Tuesday, the China National Space Administration (CNSA) posted guidelines for the promotion of commercial space flight and enterprises through to 2027, positioning the industry as a “vital force” for building a strong space nation.

The plan encourages commercial space firms to engage in international cooperation and exchanges, including helping developing countries build satellite applications.

It also encourages commercial firms to pioneer innovation in areas such as reusable rockets, space resource utilisation, space tourism, in-space biomanufacturing and space debris monitoring.

In recent years, China’s commercial space sector has grown rapidly, with advances such as reusable rocket technology even attracting the attention of the US, which has long been the global leader in the sector.

As Beijing and Washington fight to hold sway in creating the governing rules of outer space, China’s plan to take its commercial space industry global suggests it will no longer take restrictions set by the US for granted.

The US prohibits satellites containing American-made components or technology from being launched on Chinese rockets, citing strict export control laws and national security. This restriction is mainly enforced through the International Traffic in Arms Regulations (ITAR) administered by the US State Department.

Under ITAR, most satellites and satellite components are classified as military-grade equipment and placed on the US Munitions List, making their export tightly controlled. Even if a satellite only includes a small part originating in the US, it falls under the regulations and cannot legally be launched using Chinese launch vehicles.

The measures effectively close off China’s access to the international commercial satellite launch market, even when it has offered competitive pricing and reliable services.

China’s new plan could face other barriers as a result of measures such as the Wolf Amendment, which bars US space agency Nasa from using federal funds to cooperate with China or Chinese-owned companies in space without congressional approval.

While the amendment and Chinese plan do not prohibit other countries from space collaborations with both China and the US, the rift between the world’s top space powers has created a tricky landscape for countries with spacefaring ambitions to navigate.

In October, Shan Zhongde, CNSA director and vice-minister at the Ministry of Industry and Information Technology, visited China’s eastern Shandong province, where he inspected several commercial projects, according to a post by the agency.

This included the Zhishenxing-1, also known as Pallas-1, a reusable medium-lift rocket being developed by Galactic Energy, a private Beijing-based aerospace company.

Reusable rocket technology, pioneered by Elon Musk’s aerospace company SpaceX, helps to lower the cost of launching payloads and satellites.

Shan said Chinese President Xi Jinping valued the development of commercial aerospace and that the CNSA was dedicated to coordinating its high-quality development to accelerate the building of space power.

Building up the aerospace sector is among the emerging industry clusters that China has identified as vital within its recommendations for the country’s 15th five-year plan.

In the document released on Tuesday, the CNSA vowed to establish a commercial space development fund and broaden government procurement to integrate capabilities such as launch vehicles, telemetry and control, as well as satellites into national missions.

China will encourage open competition to allow commercial enterprises to take part in space research programmes with a focus on cutting-edge technology, according to the CNSA.

It would also encourage local governments to build innovation platforms for developing areas such as intelligent satellites and reusable rockets.

The CNSA said there would be an increase in the sharing of national networks, such as telemetry, tracking and command systems, as well as in large-scale experimental facilities such as rocket engine testing and space environment simulation facilities.

The Chinese space agency added that it would prioritise technology and products such as reusable launch vehicles, satellite constellation systems, remote sensing and launch and recovery systems that focused on reliability, speed and low cost.

The plan said the operations of commercial space firms would be guided and supervised to comply with safety and international space rules.