A photo illustration of Digital Cryptocurrency, Litecoin (LTC), Monero (XMR), Bitcoin (BTC), Ethereum (ETH), Ripple (XRP) and Dash will be shown on September 13, 2018 in Hong Kong, Hong Kong.
Yu Chun Christopher Wong | S3studio | Getty Images
More than $ 50 billion in cryptocurrency moves from China-based digital wallets to other parts of the world in the past year, pointing to possibilities that Chinese investors will transfer more money than allowed out of the country, a new report claims.
Chinese citizens are only allowed to buy up to $ 50,000 in foreign currency per year at a financial institution. In the past, wealthy citizens have run the limit through foreign investment in real estate and other assets. But the government has cut back on these methods, according to a report by Chainalysis, a blockchain forensic company.
“Cryptocurrency could get something out of the snail,” the report said.
“In the last twelve months, with China’s economy suffering due to trade wars and devaluation of the yuan at various points, we have seen more than $ 50 billion in cryptocurrency shifted from China – based addresses to foreign addresses,” sei Chainalysis.
Chainalysis sells software for compliance and research to companies and governments.
“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,” the report added.
Holders of Cryptocurrency use controversial stablecoin Tether to move their money. A stablecoin is a digital currency that is normally supported by another asset or group of assets in an attempt to stabilize its value and limit its volatility. Tether claims he is pegged to the U.S. dollar.
Stablecoins are useful for transferring large amounts of cryptocurrency because, in theory, the value of the cryptocurrency that moves a person should not show any wild swings.
“In total, more than $ 18 billion worth of Tether has moved from East Asian addresses to those based in other regions in the last 12 months. Again, it is highly unlikely that this is all capital flight,” Chainalysis said in its report .
Part of this activity can be explained by China-based miners converting their new currency coins into Tether and sending them to exchanges abroad, Chainalysis said. Miners are people with special computers who solve complex mathematical problems to coin new cryptocurrency. If they solve this complex problem, miners will be rewarded in cryptocurrency.
But the report also found significant spikes in Tether movement at certain news events. First, in October, Chinese President Xi Jinping threw his support behind blockchain, the technology that supports many digital currencies.
Second, after a massive sell-off mid-March, the price of bitcoin began to recover.
“Shares in both the US and China are still losing value at the moment, as is the yuan itself. It is possible that the economic turmoil may have caused some capital flight from China, although much of the Tether movement in East Asia could have been have cryptocurrency traders move their holdings to international exchanges to trade at a time when the volatility of cryptocurrency price was high, ”said Chainalysis.
Tether himself is embroiled in controversy. In April 2019, the attorney general of New York accused bitcoin exchange operator Bitfinex and tether issuer Tether Limited of concealing a $ 850 million loss. Both companies have misjudged.
China has previously taken a hard line on cryptocurrencies. In 2017, Beijing banned fundraising through cryptocurrencies, known as initial currency offerings or ICOs and local exchanges.
However, Xi has support for the underlying technology, known as blockchain. Meanwhile, China’s central bank, the People’s Bank of China, is developing its own digital currency.
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