- Data shows that the amount of unregulated fund outflow dropped by 40% in China after the recent round of tightened crypto regulations.
- The development could drive China to adopt even stricter rules for the industry.
- Crypto enthusiasts are not buying China’s reasons for their crackdown on the industry.
The foci of the entire cryptocurrency space have been on China as the country has made news repeatedly by going after the crypto industry with increasing intensity, especially this year.
The tightening regulatory scrutiny of the crypto industry seems to be paying off for the country however as new data suggests.
After the May round of strengthened cryptocurrency regulations by the Chinese government, the number of unregulated funds leaving China to foreign countries dropped by 40%. The report states that in the first half of 2021, unregulated funds outflows from China amounted to $28.3 billion. This amount surpassed the total outflow for 2020 by 1.6x.
The news report also noted that unregulated outflows have been an issue for a while now in China. China first began tackling it in 2017 when it began putting up measures to stem the unregulated outflow of funds through the crypto market.
The decrease in the outflow of funds may be indicative that Chinese citizens have caved in to the mounting pressure from the government and become more cautious in interacting with cryptocurrency in order not to run into trouble with authorities.
Significantly, it may follow that with the government’s recent success metrics, they may be motivated to adopt even more strict rules to add to the existing one in order to totally stamp out the industry.
China has cited 3 main reasons for its move to completely eliminate crypto from the country. In a recent forum, the Director of the Payment and Settlement Department of the People’s Bank of China Wen Xinxiang reiterated these reasons, stating that virtual currencies diverted business from banks, closed operations of the payment system, and were ultimately used for illegal actions.
A case study of this occurrence was pointed out by the China Business Network report. The case of one Chen Moubo who fled to Australia in 2018 following allegations of committing fraud using cryptocurrencies. Moubo secretly instructed his wife to liquidate all his assets acquired with illegal funds and was able to escape justice because of cryptocurrencies.
Despite the reasons cited, observers in the cryptocurrency market are not sold on China’s reasons. Crypto enthusiasts think that China is driving out cryptocurrencies to make room for its digital yuan to gain dominance in the country. To them, China considers most of the leading cryptocurrencies to be competitors to the digital yuan in the long term due to their popularity with investors.