About $50 billion in cryptocurrency assets have left China in the past year, according to new research by blockchain forensics firm Chainalysis.
Analysts say it is a possible indication that investors are bypassing rules that limit how much capital they’re allowed to transfer from the nation. China limits citizens to moving the equivalent of $50,000 a year out of the country.
The cryptocurrency Tether accounted for more than $18 billion of the outflows from East Asia in the period, the firm said in a report.
Tether, a so-called stablecoin because its value is pegged to the U.S. dollar, accounts for 93 percent of stablecoin use in the region.
“Stablecoins like Tether are particularly useful for capital flight, as their USD-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 said in the report.
Wealthy Chinese circumvented the limits on sending cash overseas by making overseas real estate investments or creating shell companies, Chainalysis said.
In 2019, the state of New York sued Tether and its related company Bitfinex, one of the largest crypto exchanges, over the loss of more than $850 million in client and corporate funds.
The Commodity Futures Trading Commission subpoenaed the two companies in 2017 over an allegedly false claim that one U.S. dollar backed every Tether coin.
The companies have said they’ve done nothing wrong in the New York state case. The amount of outstanding Tether has skyrocketed to $12.8 billion from about $2 billion in 2019.
Merchants often use Tether for cross-border transactions, Kim Grauer, Chainalysis’s head of research and author of the report, said.
China based firms conducting business in Latin America, for example, are increasingly accepting Bitcoin and Tether for payment. The Chinese government in 2017 outlawed the exchange of yuan for cryptocurrency.