The Chinese withdraw money from the country through cryptocurrencies

The Future of Cryptocurrency? China’s Entirely Digital Currency Explained (DCEP) – TLDR News

The Chinese withdraw money from the country through cryptocurrencies

$ 50 billion withdrawn from China through cryptocurrencies, indicating capital flight from the Middle Kingdom, bypassing the rules of Beijing.

The Chinese withdraw money from the country through cryptocurrencies

A new report claims more than $ 50 billion in cryptocurrencies have been transferred from Chinese digital wallets to other parts of the world over the past year.This suggests that Chinese investors are withdrawing more money from the country than is allowed by law..

Chinese citizens are allowed to buy up to $ 50,000 in foreign currency from financial institutions per year. In the past, wealthy citizens have bypassed the limit through foreign investment in real estate and other assets, but the government has taken harsh measures against these schemes. This is evidenced by the report of the company Chainalysis, an expert in the field of blockchain..

The Chinese withdraw money from the country through cryptocurrencies

«However, cryptocurrency may fill the gap a bit.», – the report says.

«Over the past twelve months, as China’s economy has suffered from trade wars and the devaluation of the yuan around the country, we have seen more than $ 50 billion worth of cryptocurrencies move from addresses based in China to addresses overseas.», – experts say Chainalysis.

Chainalysis sells hardware and research software to businesses and governments.

«Obviously, not all of this is capital flight, but we can see $ 50 billion as the absolute ceiling for capital flight through cryptocurrency from East Asia to other regions.», – the report says.

Cryptocurrency holders use the dubious Tether stablecoin to move their money. A stablecoin is a digital currency that is usually backed by another asset or group of assets in order to stabilize its value and limit volatility. Tether is allegedly pegged to the US dollar.

Stablecoins are useful for transferring large amounts of cryptocurrency because, in theory, the value of a cryptocurrency that a person moves should not fluctuate dramatically..

«In just over the past 12 months, Tether has moved more than $ 18 billion from East Asian addresses to addresses in other regions. Again, it is unlikely that this is all capital flight.», – noted in the Chainalysis report.

In part, this activity can be explained by the fact that miners in China are converting their newly minted coins to Tether and sending them to exchanges abroad, experts at Chainalysis believe. Miners are people with specialized computers who solve complex mathematical problems to create a new cryptocurrency. After solving a difficult problem, miners are rewarded in cryptocurrency.

But the report also found significant spikes in Tether movement in response to some news events. First, in October, the President of China Xi Jinping supported the blockchain technology underlying many digital coins.

Second, after a massive sell-off in mid-March, the price of bitcoin began to recover..

«Stocks in both the US and China were still losing value at the time, as was the yuan itself. The economic crisis may have triggered capital flight from China, although much of Tether’s movement may have been related to cryptocurrency traders from East Asia moving their assets to international exchanges for trading at a time when cryptocurrency price volatility was high.», – analysts suggest Chainalysis.

Tether itself has become the subject of controversy. In April 2019, the New York attorney general accused bitcoin exchange operator Bitfinex and peg issuer Tether Limited of concealing $ 850 million in losses. Both companies denied wrongdoing..

Previously, China took a tough stance on cryptocurrencies. In 2017, Beijing banned fundraising with cryptocurrencies known as initial coin offerings or ICOs and local crypto exchanges..

However, Xi has endorsed an underlying technology known as blockchain. Meanwhile, the Chinese Central Bank, the People’s Bank of China, is developing its own digital currency..

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