Chinese importers in Russia are utilizing tether to move significant amounts of money back to China on a daily basis, CoinDesk reports. The US dollar-backed cryptocurrency has become a favorite among merchants due to its relative stability compared with other coins despite recent scrutiny from US law enforcement.
Why it matters: Converting cash into crypto before repatriating it means merchants can avoid government regulations, including limits on how much foreign currency individuals can buy or sell in a year.
- Its heavy use in this scenario is a vote of confidence for tether as competing stablecoins grow in popularity.
- Tether has come under fire in the US after law enforcement revealed that the coin is only 74 percent collateralized by fiat currency.
Details. The impacts of the trading activity are felt in Russia, too, with the Bank of Russia attributing as much as $9.5 billion in monthly unregulated cashflow almost exclusively to Chinese merchants selling goods at a small number of warehouse-based malls in Moscow.
- CoinDesk reports that the amount of tether purchased by Chinese businesses can range from $3 to $10 million per day, with some individual Russian OTC traders selling up to $3 million per day.
- Traders mostly dealt in Bitcoin before switching to tether after the 2018 bear market.
- Tether is still highly liquid despite China’s ban on spot-trading in 2017.
- Chinese traders tap OTC market makers, who use international exchanges to match with buyers who will transfer fiat in exchange for crypto.
Context: The news comes on the heels of a court ruling that cryptocurrency assets should be recognized as virtual property under Chinese law, reaffirming the legality of crypto ownership even as trading and ICOs remain outlawed.
- The crypto sector has been receiving increased attention in China of late.
- The Bank of China’s publication of a pro-bitcoin infographic and reports that the the central bank will fast-track the development of its own cryptocurrency signals a possible shift in sentiment.
- The government has been hesitant to fully unleash the decentralized technology at the risk of stifling innovation and falling behind other countries with less restrictive regulations.