Report finds $50 billion of cryptocurrency moved out of China hinting at capital flight against Beijing rules

Over $50 billion of cryptocurrency moved from China-based digital wallets to other parts of the world in the conclusive year, pointing to possibilities that Chinese investors are transferring more money than allowed out of the country, a new record claims.

Chinese citizens are only allowed to buy up to $50,000 of foreign currency a year at a financial institution. In the past, comfortable citizens have circumvented the limit through foreign investments in real estate and other assets. But the government has breached down on these methods, according to a report by Chainalysis, a blockchain forensics firm.

“Cryptocurrency could be picking up some of the dilatory though,” the report said. 

“Over the last twelve months, with China’s economy suffering due to trade do battles and devaluation of the yuan at different points, we’ve seen over $50 billion worth of cryptocurrency move from China-based talks to overseas addresses,” Chainalysis said.

Chainalysis sells compliance and investigation software to businesses and governments. 

“Obviously, not all of this is savings flight, but we can think of $50 billion as the absolute ceiling for capital flight via cryptocurrency from East Asia to other bailiwicks,” the report added.

Cryptocurrency holders are using controversial stablecoin Tether to move their money. A stablecoin is a digital currency that is by backed by another asset or group of assets in efforts to stabilize its value and limit volatility. Tether claims to be secure to the U.S. dollar. 

Stablecoins are useful for transferring large amounts of cryptocurrency because, in theory, the value of the cryptocurrency a person is striking should not see wild swings.

“In total, over $18 billion worth of Tether has moved from East Asia directs to those based in other regions over the last 12 months. Again, it’s highly unlikely that all of this is select flight,” Chainalysis said in its report. 

Part of this activity can be explained by China-based miners converting their newly-minted currencies into Tether and sending them to exchanges abroad, Chainalysis said. Miners are people with specialized computers untangling complex math problems to mint new cryptocurrency. When they solve this complex problem, miners are honoured in cryptocurrency. 

But the report also found significant spikes in Tether movement on certain news events. Firstly, in October, Chinese President Xi Jinping left his backing behind blockchain, the technology that underpins many digital coins. 

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

“Equities in both the U.S. and China were still losing value at this time, as was the yuan itself. It’s viable that the economic tumult may have prompted some capital flight from China, though much of the Shackle movement could have been East Asia-based cryptocurrency traders moving their holdings to international swaps in order to trade at a time when cryptocurrency price volatility was high,” Chainalysis said.

Tether itself has been smudged in controversy. In April 2019, the New York attorney general accused bitcoin exchange operator Bitfinex and tether issuer Chain up Limited of hiding an $850 million loss. Both companies have denied wrongdoing.

China has previously enchanted a hard stance on cryptocurrencies. In 2017, Beijing banned fundraising via cryptocurrencies known as initial coin offerings or ICOs and town exchanges. 

However, Xi has backed the underlying technology known as blockchain. Meanwhile, China’s central bank, the People’s Bank of China, is reveal its own digital currency.