fbpx

Capital Flight? More Than $50 Billion In Cryptocurrency Moved Out Of China

Capital Flight? More Than $50 Billion In Cryptocurrency Moved Out Of China

capital flight
Capital flight? More than $50 billion in cryptocurrency has been moved out of China after the government cracked down on foreign investments. A man walks by an electronic stock board of a securities firm in Tokyo, Dec. 18, 2019. (AP Photo/Koji Sasahara)

Chinese citizens may be using cryptocurrency to move their money out of the country after the Chinese government cracked down on foreign investments through real estate and other assets.

Chinese citizens can buy up to $50,000 of foreign currency a year at a financial institution, CNBC reported.

More than $50 billion of cryptocurrency moved from China-based digital wallets to other parts of the world in the last year, suggesting that Chinese investors are transferring more money than allowed out of the country, according to a report by blockchain forensics firm Chainalysis.

“Over the last twelve months, with China’s economy suffering due to trade wars and devaluation of the yuan at different points, we’ve seen over $50 billion worth of cryptocurrency move from China-based addresses to overseas addresses,” Chainalysis reported. “Obviously, not all of this is capital flight, but we can think of $50 billion as the absolute ceiling for capital flight via cryptocurrency from East Asia to other regions.”

China has denounced cryptocurrencies in the past. In 2017, it banned fundraise via cryptocurrencies by way of initial coin offerings or ICOs.

However, the Chinese President Xi Jinping has backed blockchain, the technology behind cryptocurrencies. The People’s Bank of China — China’s central bank — is developing its own digital currency

Since Beijing’s 2017 ban on direct conversions of yuan for cryptocurrency, the U.S. dollar-pegged stablecoin Tether has been a popular stand-in for fiat for traders in the Chinese market, Cointelegraph reported. 

East Asia’s relative share of global crypto activity has been declining over the past 12 months, said Philip Bonello, director of research Grayscale.

Listen to GHOGH with Jamarlin Martin | Episode 73: Jamarlin Martin Jamarlin makes the case for why this is a multi-factor rebellion vs. just protests about George Floyd. He discusses the Democratic Party’s sneaky relationship with the police in cities and states under Dem control, and why Joe Biden is a cop and the Steve Jobs of mass incarceration.

“It appears that users in many regions use stablecoins to access U.S. dollars for cross-border payroll, remittance, and capital flight from local currencies,” Bonello said.

A stablecoin is a digital currency that is usually backed by another asset or group of assets in efforts to stabilize its value and limit volatility.

East Asia has the lowest share of on-chain volume devoted to Bitcoin (BTC), at 51 percent of transfers by volume. The rest consists of stablecoins, of which 93 percent are tether (USDT), Cointelegraph reported.

Tether is a blockchain-based cryptocurrency whose cryptocoins in circulation are backed by an equivalent amount of traditional fiat currencies such as the dollar, the euro or the Japanese yen, which are held in a designated bank account.