$50B worth of cryptocurrency exits China as investors worry about the country’s economy
Blockchain forensics firm Chainalysis revealed that $50 billion in cryptocurrency was moved out of China in the past 12 months.
Mon, 24 Aug 2020, 06:16 am UTC
People have been moving massive amounts of cryptocurrency from China recently. The main reason for the capital flight in the past 12 months is the worsening US-China trade relations, according to a recent report from a blockchain forensics firm.
Chinese investors move $50 billion worth of cryptocurrency out of the country in the past twelve months based on a report by Chainalysis published on Thursday, according to Business Insider. The report noted that the capital movement was likely caused by concerns over China’s economy due to the ongoing trade war with the U.S.
“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 wrote. “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 blockchain forensics firm also noted that Chinese citizens likely breached capital rules as the government only allows each person to move around $50,000 out of the country per year. Historically, wealthy citizens have gotten around this restriction through foreign investments in real estate and other assets as well as employing the use of shell companies to disguise their investments.
Chainalysis said that Chinese cryptocurrency investors mainly use Tether (USDT) to move their money, according to CNBC. Tether is a stablecoin pegged to the U.S. dollar stabilizing its value and minimizing its volatility. This stability makes it useful for moving large amounts of cryptocurrency.
“In total, over $18 billion worth of Tether has moved from East Asia addresses to those based in other regions over the last 12 months,” Chainalysis wrote. “Again, it’s highly unlikely that all of this is capital flight.”
One reason for the cryptocurrency movement from China is due to miners based in the country who converted their newly-minted tokens to Tether and sent them to crypto exchanges abroad. Another reason is that Bitcoin’s price has already recovered after last March’s plunge.
“Equities in both the U.S. and China were still losing value at this time, as was the yuan itself,” Chainalysis said. “It’s possible that the economic tumult may have prompted some capital flight from China, though much of the Tether movement could have been East Asia-based cryptocurrency traders moving their holdings to international exchanges in order to trade at a time when cryptocurrency price volatility was high.”
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