Before Bitcoin got outright banned in China, the Asian powerhouse was the world’s leading cryptocurrency market. However, because of the freedom that comes from a decentralised cryptocurrency market, and a few other factors, the government was quick to put in obstacles to its continued growth.
But, those in the Bitcoin and cryptocurrency space know that it is near impossible to kill off Bitcoin, and in fact, in China, business is booming. An excerpt from Chainalysis’s upcoming 2020 Geography of Cryptocurrency Report claims that over $50 bln worth of cryptocurrencies has moved from Chinese addresses to overseas accounts.
This shows that not only is the effectiveness of China’s crypto ban not as powerful as the government would have liked, it also indicates that some of their bigger concerns are coming true. The fact that the Chinese are still using crypto, and moving it off shore, means that capital flight is a real concern.
This may be part of the workarounds that the Chinese citizens are using to invest in real estate and other offshore assets — as regulations in China restrict citizens from moving more than $50 000 out of the country.
In effect, the concern around this is probably only for the government regulators who have been so strict on cryptocurrencies — but welcoming of blockchain. For the cryptocurrency space itself, it is good news that this massive market is still a sleeping giant.
Findings of the report
The staggering $50 billion figure seen leaving China through cryptocurrency is of course noteworthy, but there is a lot to read out of the report. The report highlights the fact that China has a major role to play in the mining of Bitcoin. The country accounts for over 60 percent of the global Bitcoin mining hashrate and a large portion of newly mined Bitcoin originate from Asia-based addresses.
But interesting, another key takeaway from the report was the role that Stablecoins play in the East Asian market. The use of Stablecoins accounts for up to 33 percent of all trading activity on chain.
The demand for Tether (USDT), the US Dollar-backed Stablecoin, has been so high that it has overtaken Bitcoin as the most received cryptocurrency by addresses in East Asia in June 2020.
This in itself points towards how cryptocurrencies are being used as the more transactive USDT will mean more use cases. The fact that less Bitcoin is being moved, more of a store of value, indicates that this is not a way to move savings or assets off of China, but rather for purchasing away from the controls.
A potential market?
It is unlikely that China will ever have a turn around on its views on cryptocurrency and reverse the ban. The country is enamoured with blockchain, and will be launching their own CBDC soon, but it appears as if a ‘black market’ for crypto will continue to boom.
It again speaks to the difficulty in controlling and curtailing this financial system, and that with its digital nature, there will always be a way for the people to access this decentralised money system.