$50 Billion of Cryptocurrency moved out of China in the last year amid hong kong protests
According to independent reserch conducted by Blockchain analytic firm Chainalysis, over the last 12 months over $50 Billion dollars worth of cryptocurrency has been moved from wallets in China to international wallets around the world.
China is the largest "self-Sustaining" crypto market
China has been a proud early-adopter of Blockchain technology. Chinese Bitcoin miners control anywhere from 55-66% of the global network hashing power. On top of that Chinese citizens are uniquely positioned to take advantage of crypto markets. Digital transactions make up 93% of the money exchanged in the country with most businesses not accepting any form of cash payments. This has allowed China to create the largest crypto market in the world. Until recently the vast majority of cryptocurrency transactions have been to other parties within the region.
This new surge of external crypto transactions has the potential to upset the balance of the cryptocurrency market in the region. This begs the question…
Why is money fleeing the region?
There are two main factors that are contributing to the capital flight out of China. The first is the uncertainty around the ongoing trade war with the U.S. and the extent of devaluation of the native yuan. As a spokesperson for Chainalysis put it:
“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.”
Secondly, cryptocurrency is easily transferred across borders. This is one of the main selling features of Blockchain assets. China has a long imposed restriction on currency leaving the country. Specifically China limits the amount of assets leaving the country to a maximum of $50,000 per year. There are also several further restrictions that make it harder for normal citizens to move money out of their native economy. This poses a problem if investors want to diversify into other markets. In the past wealthy Chinese citizens have been successful with circumventing certain Capital Control laws by moving assets through Bejing, and by investing in foreign real-estate and shell companies. However with new sanctions in place for Bejing, and the current crack down on these methods Cryptocurrency seems to be filling the void.
What does this mean for the future of cryptocurrency and china's economy
The recent movement of money via cryptocurrency from an area of the world with ever increasing regulations and sanctions prohibiting excess cash outflow is a perfect use case for cryptocurrency. This is exactly why decentralized cryptocurrency assets are so valuable for protecting the wealth of investors. It also provides perspective of the sentiment of Chinese investors. Although this amount of monetary outflow seems to be significant, it is very likely that this level of capital flight was already being accomplished through other means prior to this year.