The use of Bitcoin as a capital funneling method for Chinese investors is hitting the mainstream news, however, there is already talk of authorities clamping down on it - again.
As China’s yuan continues its multi-year low against the dollar, authorities have acted to stem the outflow of value. Investors are finding ever more ingenious ways of getting their capital out of the country - and Bitcoin is becoming the method of choice.
Now, even regional news outlets are quoting sources actively using Bitcoin where other methods are no longer available.
Investor: China’s Market Rules ‘Not Fair’
Singapore outlet The Straits Times interviewed Wayne Zhou, CEO of a Shanghainese multinational goods company, who said he is “considering buying gold or the virtual currency... which he can buy in China and sell for foreign currencies overseas.”
"The market rules in China are not fair. Any day, they (the authorities) could roll out some new rules at midnight and you can't even get out. But there will always be those who have gotten wind of it earlier and unwound all their investments ahead of everyone else.”
Bitcoin’s increasing popularity will likely only have benefitted from Chinese authorities’ latest ruse to prop up the yuan. Earlier this month, the country’s regulator, the State Administration of Foreign Exchange, lowered the threshold for “vetting” transactions going abroad from $50 mln to $5 mln.
A source told Reuters at the time that such transactions “may not be approved” after inspection.
Chinese Bitcoin u-turn?
However, all may not be easy for those in the know about crypto. China has long held the record for Bitcoin exchange, even while its legal status has gone through many shifts in the past few years. The yuan’s weakness could be the tipping point for a renewed push to crush access for the lay investor.
The Straits Times quotes analysts who are hedging their bets that capital controls will be “further tightened” as markets expect further surges in the outflow of capital. Direct investments topped $146 bln in the first ten months of 2016.
"The small and medium-sized companies are highly leveraged, and liquidity is needed to keep businesses going,” National Australia Bank’s Gerard Burg said.
"Given changes in the financial sector, where there is increased interbank lending and more connectivity between the banks and the shadow banking sector, more liquidity is also needed.”