The World Economic Forum published a report on its official website this Monday (31) seeking to understand what reasons led China to completely ban cryptocurrencies in September last year. The conclusion: fear of capital flight from the country.
By raising the crackdown to the maximum level in 2021, China claimed that cryptocurrencies facilitated the practice of crimes and that they put the country’s economy at risk due to high volatility.
But in its text, the World Economic Forum analyzes the possibility that the real reason was to seek a way to close the doors so that the Chinese population cannot send assets abroad.
The entity cites the Chainanalysis Blockchain, which recorded that between 2019 and 2020, more than $50 billion worth of cryptocurrencies left East Asia.
“As China had a massive presence on East Asian exchanges, the Chainanalysis team believes that much of this outflow of capital was an inflow out of China. While Chainanalysis does not have a precise figure on how much capital has flown out of China between 2019 and 2020, they estimate it to be more than $50 billion.
China sets a purchase limit of $50,000 worth of foreign currency per year for its citizens. Bitcoin was being an option for people to be able to buy more assets and without having the surveillance of the authorities.
prosperity program
The report recalls that, in 2017, a month after banning exchanges from operating in the country (the complete ban would come in 2021), the Chinese Communist Party announced the “prosperity program”: a policy to increase the population’s quality of life. with heavy state investment.
The text speculates that barring cryptocurrencies may have been a means of getting China’s wealthiest class to agree to pay more taxes and contribute to national wealth.
“All in all, there is strong evidence to suggest that the ban on cryptocurrencies was a response to China’s frequent capital flight problem. Given the large sum of capital that has already flown out of the country via crypto exchanges, the Party must have been aware that cryptocurrencies were exacerbating China’s chronic problem of capital flight.”
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