Tether the Cryptocurrency of Choice for Leaving
The majority of money moving out the country via cryptocurrencies is happening through Tether (USDT). This could be from Tether being inherently stable, especially when compared to Bitcoin or Ethereum. Tether is a stablecoin, and is pegged to the US dollar. While Chinese nationals are moving their money out of the country, they don’t have to worry about a significant loss of value because of market volatility. There may be another reason why Tether is preferred over other cryptocurrencies. The USD is still the world’s most dominant reserve currency. Whether people in the crypto space like to admit it or not, holding tether is like backing the USD.
There are stablecoins pegged to other reserve currencies such as the Euro, and the Yuan. So why aren’t we seeing as much publicity or attention on these other stablecoins? Other stablecoins aren’t big enough to be effective at moving large amounts of capital. For whatever reason, the entire crypto world prefers to work in the crypto dollar. This mimics the dominance of the USD on the world stage as the dominant world reserve currency. Today, more than 61% of the world’s reserves and 40% of the world’s debt is denominated in USD.
Restrictions on Amount of Money that can Leave
China has placed a restriction on the amount of foreign currency that its citizens can buy each year. Chinese citizens are limited to buying $50,000 worth of foreign currency in any given year. This limit can really stifle the amount of business that can be done for the upper echelons of Chinese citizens. This limit is essentially a form of censorship. The Chinese government is known for various forms of surveillance and censorship. It therefore shouldn’t surprise anyone that they are actively controlling the flow of capital investment in other countries. This restriction is just the sort of thing that would encourage some citizens to move money into the cryptosphere.
One of the main properties of many cryptocurrencies is that they are resistant to censorship. A literal world of opportunity opens up once you have moved a sufficient amount of money into cryptocurrency. China would prefer to a degree to keep as much of its citizens’ value inside the borders. Cryptocurrency stands in direct opposition to this idea. Despite the best efforts of the Chinese government, it appears that they are unable to stop billions of dollars from leaving China through cryptocurrency.