With more than USD 50 billion in crypto going to wallet addresses tied to East Asia and heading to other regions worldwide over the past year, indications point to crypto progressively being used to avoid strict Chinese capital controls new records from on-chain analysis firm Chainalysis said.
As claimed to the report, the East Asian region sends more cryptocurrency to addresses abroad than any other part, with USD 50 billion in crypto being sent out between July 2019 and June 2020. The figure compares with just USD 38 billion being sent out of Western Europe, the region with the second-largest outflows.
And while the report emphasized that large outflows of crypto from East Asia are natural given the large number of miners located in the region, the authors also said that they “believe that at least some of this activity represents a capital flight from China.”
The high level of exist from East Asia is particularly impressive. Given the capital control rules in China that limit the amount of foreign currency, an individual can exchange to USD 50,000 per year through financial institutions. To circumvent these restrictions, cryptocurrency has grown to become an attractive way to get money out, with the stablecoin Tether (USDT) being a favorite choice to get the job done.
“[…] Stablecoins are particularly useful for capital flight, as their fiat currency-pegged value means users selling off large amounts in exchange for their fiat currency of choice can rest assured that it’s unlikely to lose its value as they seek a buyer,”
Chainalysis noted in the report, while also adding that out of the USD 38 billion in total crypto outflows, USD 18 billion were in the form of Tether.
“All of this goes to show how crucial East Asia is to the worldwide cryptocurrency economy,” Chainalysis further wrote while explaining that China, in particular, plays a vital role in the crypto economy. The firm’s report concluded by saying:
“In China’s case, it’s particularly interesting to think about these cryptocurrency trade relationships in the context of national projects like the Belt and Road Initiative, through which the Chinese government seeks to expand its global influence by investing in infrastructure projects around the globe. Whether intended by the government or not, the data indicates that cryptocurrency may play a role in advancing that goal.”