Chinese users have reportedly moved $ 50 billion in cryptocurrency out of the country

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A photo illustration of digital cryptocurrency, Litecoin (LTC), Monero (XMR), Bitcoin (BTC), Ethereum (ETH), Ripple (XRP) and Dash is seen on September 13, 2018 in Hong Kong, Hong Kong.Yu Chun Christopher Wong | S3studio | Getty Images

Over $ 50 billion in cryptocurrency has been transferred from China-based digital wallets to other parts of the world over the past year, indicating the possibility of Chinese investors transferring more money than is allowed out of the country, according to a new report.Chinese citizens are only allowed to purchase up to $ 50,000 of foreign currency per year from a financial institution. In the past, wealthy citizens have bypassed the limit by investing abroad in real estate and other assets. But the government has cracked down on these methods, according to a report by Chainalysis, a blockchain forensics firm.

“Cryptocurrency could fall behind, however,” the report said.

“Over the past twelve months, as the Chinese economy suffers due to trade wars and the devaluation of the yuan at various times, we have seen more than $ 50 billion in cryptocurrency move from China-based addresses to addresses abroad, ”Chainalysis said.

Chainalysis sells compliance and investigation software to businesses and governments.

“Obviously, all of this is not capital flight, but we can see $ 50 billion as the absolute ceiling for capital flight via cryptocurrency from East Asia to other regions. Adds the report.

Cryptocurrency holders use the controversial Stablecoin Tether to transfer their money. A stablecoin is a digital currency that is usually backed by another asset or group of assets with the aim of stabilizing its value and limiting volatility. Tether claims to be pegged to the US dollar.

Stablecoins are useful for transferring large amounts of cryptocurrency because, in theory, the value of the cryptocurrency that a person moves shouldn’t experience wild fluctuations.

“In total, more than $ 18 billion of Tether has been moved from addresses in East Asia to those based in other regions in the past 12 months. Again, this is all very unlikely to be capital flight, ”Chainalysis said in his report.

Part of this activity can be explained by the fact that miners based in China convert their newly minted coins into Tether and send them to exchanges abroad, Chainalysis said. Miners are people with specialized computers who solve complex mathematical problems to create a new cryptocurrency. When solving this complex problem, miners are rewarded with cryptocurrency.

But the report also revealed significant spikes in the Tether movement over some current events. First, in October, Chinese President Xi Jinping backed blockchain, the technology behind many digital coins.

Second, after a massive sell off in mid-March, the price of bitcoin has started to recover.

“Stocks in the US and China were still losing value at that time, as was the yuan itself. It’s possible that the economic uproar may have caused some capital flight out of China, although much of the Tether movement could have been based in East Asia. cryptocurrency traders moving their holdings to international exchanges in order to trade at a time when cryptocurrency price volatility was high, ”Chainalysis said.

Tether himself has been mired in controversy. In April 2019, the New York attorney general accused bitcoin exchange operator Bitfinex and linker Tether Limited of hiding a loss of $ 850 million. Both companies have denied wrongdoing.

China previously took a tough stance on cryptocurrencies. In 2017, Beijing banned fundraising through cryptocurrencies known as Initial Coin Offerings or ICOs and local exchanges.

However, Xi backed 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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