According to a report from the blockchain analytics firm Chainalysis, over the past 12 months, over $50 billion worth of cryptocurrency has left China. Analysts claim that the yuan’s fluctuating valuation over this year and tensions amid the ongoing U.S.–China trade war could be spurring local investors to evade capital controls. Beijing bars citizens from moving more than the equivalent of $50,000 out of the country each year.
Tether (USDT) in particular — could be playing a key role. Since Beijing’s 2017 ban on the direct conversions of the yuan to cryptocurrency, the U.S. dollar-pegged stablecoin Tether has served as a popular stand-in for fiat for traders in the Chinese market. In the East Asian market, over $18 billion worth of Tether was moved to addresses based in foreign jurisdictions over the past year. How much of this reflects capital flight remains difficult to establish conclusively.
While yuan-USDT trades are, strictly speaking, also prohibited, OTC (over the counter) brokers continue to sell the stablecoin to enable traders to lock in their gains from crypto trades without worrying about price volatility. In June of this year, Tether outflanked Bitcoin to become the digital asset that East Asian addresses received the most.
The government has meanwhile cracked down on routes for offshoring capital via foreign real estate investments and other assets, leaving cryptocurrency as a possible alternative.
Other contributing factors include uncertainty as to how Beijing’s forthcoming national cryptocurrency will impact the private digital asset market. Chainalysis suggests that this may be driving China’s cryptocurrency community “to move portions of their holdings overseas.”
Source: Central News Agency, August 22, 2020