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Tencent Disclose Bitcoin Used To Transfer CNY Oversea

Even as authorities vigilantly tighten capital controls for capital outflow pressure,  people are getting cleverer and finding new approach to transfer their asset out of China. When ways like buying large amounts of insurance in Hong Kong and exchanging through transnational companies fail to meet the domestic demand,  some people began to focus their ambition on bitcoin. To a certain extent, great demand for foreign currency purchase may be a trigger to push up the price of bitcoin, and bitcoin’s perform in turn strengthen the confidence of those in need of foreign currency. CNY used for bitcoin trading can circumvent scrutiny with much convenience, and at the same time fund security is ensured. As Tencent Finance commented.

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In a cafe in Beijing, Duan Wei, a young man in his early 20s, transferred his CNY to USD with a few clicks on the keyboard in several minutes. His computer screen shows several curves instead of bank client end. It is the K line of bitcoin.

Following this pattern, Duan’s CNY can flow freely across borders without restriction.

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  • Buy Bitcoin with CNY from the domestic trading platform
  • Withdraw bitcoin from the domestic trading platform
  • Transfer bitcoin to the foreign exchange
  • Sell bitcoin on the foreign exchange
  • Receive USD in your foreign exchange account

Bitcoin can be easily and freely exchanged into fiat of many countries. And it is regarded by most central banks as commodities rather than currencies, which help avoid it from the capital controls in some countries.

As the exchange rate of CNY continues to fluctuate, bitcoin seems to have become the newest way for funds to circumvent foreign exchange controls and set off an unanticipated wave in some fields.

Meet The Needs of High-Net-Worth Clients

An employee with a private wealth management company in Beijing, has been asked frequently by clients in recent years about the issue of overseas asset allocation.

Although these clients are all served with experienced overseas investment consultants and matched with high-quality projects. However, a foreign exchange quota of $50,000 a year for Chinese nationals has been the roadblock for these clients’ capital to go offshore.

Usually immigration companies or private wealth management companies will recommend their clients to purchase large amounts of insurance in Hong Kong, or purchase foreign currency from a transnational trading company. However, both ways have some drawbacks.

For insurance purchasing, USD-priced insurance policy purchased by clients’ CNY will be mortgaged to obtain USD loans from bank. The said USD then will be used to complete the overseas asset allocation. While how much and how long you can loan depend on the terms of the insurance policy and the intermediate procedures are complicated. In response to this, measures soon followed that domestic payment via UnionPay for life insurance featured by capital investment were suspended since October 29, 2016.

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As for transactions with transnational trading companies, whose businesses in China and USA with reserve of both currencies do provide great convenience. However, it is sometimes difficult to match a proper trading company and satisfying exchange rate for a client.

Considering that, people like Duan Wei offer a new way for these clients.

Transfer CNY overseas by trading bitcoin has long been practiced. As early as 2013, a number of bitcoin insiders stated that some of them have remit tuition and living expenses to relatives and friends who were studying overseas in this way. In addition, some even use bitcoin trading to transfer part of their asset. Back then such cases were not that many. He attributed the reasons as following: First, at that time bitcoin was not widely accepted; Secondly, foreign currency exchange from bitcoin trading is vulnerable to its violent volatility and bears the risks of trading platform’s getting away with your money; Last but not least, the exchange rate of CNY was firm against USD back then.

But now all these have changed.

A new approach to have CNY asset transferred overseas

Bitcoin becomes an easy and fast way to have CNY funds transferred overseas as CNY exchange rate goes ups and downs.

Bitcoin trading platforms require real-name registration, it is a measure of anti-money laundering and to ensure legitimate transactions in according to regulations. For clients who meet the real-name system requirement, different bitcoin exchanges have daily quotas varied from $ 500,000 to $ 1 million. As for the clients’ use of the exchanged USD, account managers from several platforms said they did not give a care about it.

Value-added services from “underground exchanges”

The daily quota ranging from $ 500,000 to 1,000,000 is far out of reach of 50,000 per person per year limited by the State Administration of Foreign Exchange (SAFE). Along with the advantages of quick operation, having asset transferred overseas through the bitcoin trading platform has been a new preference for some players.

However, the insider mentioned above said that the risk control measures imposed by the trading platform are quite troublesome, large sum bitcoin trading are more concentrated in OTC market.

Compared to those bitcoin trading platform, OTC trading is more obscure and offers larger exchange quota. One of the typical, also known as bitcoin “underground exchanges”, which could directly provide CNY to USD exchange, sparing the processes of bitcoin buying and selling but leaving the intermediate bitcoin transaction process entirely to these “underground exchanges”.

In addition, some “underground exchanges” could provide anonymous bitcoin wallet to people in need of foreign currency. Such wallets can conceal identity information of the holder and allow them to be withdrawn and remitted on overseas trading platforms. “Underground exchanges” even use instant messaging softwares to solicit business. An insider disclosed that these exchanges are mostly concentrated in Guangdong.

Although regulations are there, the great fluctuation of CNY exchange rate gives a push to Duan’s business. He said with confidence that as long as the costs are lower than those of traditional methods, the market of using bitcoin to transfer asset overseas will always exist; Moreover, technically, it is the easiest and fastest way to trade bitcoin for foreign currency.

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