Victor Ugochukwu · Dec 14, 2020 . 5min read
China Witnesses Outflow of $50 Billion Crypto Assets in One Year, says Chainalysis Report
Chainalysis Report states the cryptocurrency asset outflow from China in the last one year, Tether constitutes $18 Billion.
By Komal Joshi · Aug 21, 2020 . 7min read
According to the Chainalysis report, approximately $50 billion of cryptocurrency moved from China-based digital wallets to other parts of the world in the last year. It indicates that Chinese investors are transferring more money than allowed out of the country. The world’s second-biggest economy gradually eased capital controls in recent decades and made it easier to trade yuan. Although tightening it again in 2016 to prevent a flood of money moving out from the nation, those restrictions remain. There’s a $50,000-a-year cap on Chinese citizens moving money out the yuan.
Tether Constitutes $18 Billion of China’s Crypto Outflow.
The report elucidates that the controversial cryptocurrency Tether valued more than $18 billion of the outflows from East Asia. “Tether has become a U.S. dollar replacement for many people in China,” Dovey Wan, a founding partner of cryptocurrency investment firm Primitive Ventures, said in the report. “Lots of Chinese businesses and merchants, especially those working overseas, now accept Tether.”
Chainalysis states that the moving of Tether can be explained by China-based miners transforming their newly-minted coins into Tether and sending them to exchanges globally. The report further discusses that the Tether movement was witnessed after President Xi Jinping through his backing behind blockchain, that technology that supports various digital currencies.
Analyzing Intricate details of Tether and its Impact in China
Tether is a blockchain-based cryptocurrency. Its crypto coins support an equivalent amount of traditional fiat currencies held in a designated bank account. Tether tokens, the native tokens of the Tether network, trade under the USDT symbol. Tether belongs to a new breed of cryptocurrencies called stablecoins. It intends to keep cryptocurrency valuations stable, unlike Bitcoin and Ethereum.
According to the report, Tether tokens are neither a panacea nor a replacement for fiat. Tether facilitates fast settlement, deep liquidity, low fees, and stable price. Additionally, it has developed unique opportunities for crypto traders, remittances, lending products, and safe havens for people in jurisdictions with less-stable fiat currencies.
Merchants use Tether for cross-border transactions, said Kim Grauer, Chainalysis’s head of research and author of the report. For example, Chinese firms conducting business in Latin America are increasingly accepting Bitcoin and Tether for payment.
Chainalysis report elaborates that the reason for transferring crypto out of Asia depends on various factors. The region is imperative in Bitcoin mining. It utilizes computers to discover and acquire new blocks of coins. Miners often immediately sell the coins, serving to drive crypto out of the region.
Conclusively, in 2017, Beijing banned fundraising via cryptocurrencies known as initial coin offerings or ICOs and local exchanges. However, Xi has backed the underlying technology known as the blockchain. Meanwhile, China’s central bank, the People’s Bank of China, is developing its digital currency. With the increasing pace of cryptocurrencies in China, we await to see how the crypto ecosystem will unfold in the future.
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