China, the world’s second-largest economy seems to trust the world’s fastest-growing financial asset ecosystem (Tether) a lot more these days, preferring to use it to meet most money transfer needs.
Tether, which is the fourth most valuable crypto by market cap, accounted for more than $18 billion of the outflows from East Asia in the period, according to new research by blockchain forensics firm Chainalysis. Tether, a stable coin (this is because its value is pegged to the U.S. dollar), accounts for 93% of stablecoin use in the region.
Approximately $50 billion cryptos had left China in 2019, showing a surge in how investors are dodging rules that limit how much capital they’re allowed to transfer from China.
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.
Note that China only allows citizens to move the equivalent of $50,000 or less out its borders every year. Wealthy citizens usually beat such restriction by going through foreign investments in real estate and other assets, sometimes even using offshore registered businesses to carry out their investments.
Tether Chief Compliance Officer, Leonardo Real, recently explained while Tether’s price is intended to remain constant at $1. He said:
“It can sometimes fluctuate by a few cents at times of high price movement in the wider cryptocurrency market. When this happens, primary market traders are incentivized to close the gap by selling tethers at the higher price”
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