Hong Kong Crisis Heightens Stablecoins’ Use for Fleeing RMB-Denominated Assets
A token research team’s investigation has claimed it found that the recent unprecedented movement in Hong Kong has gradually improved behavior changes regarding the use of crypto assets among Asians especially Chinese. Amun’s finding suggests that USD-pegged stablecoins, in particular, have been serving as “a major investment vehicle for promptly fleeing capital controls in an attempt to preserve the wealth of Chinese individuals.”
Colliding with a growing view of a potential trend that FinTech is migratng from proprietary payment networks to using ERC20 tokens for the transferring of value based on the trust in the Ethereum and the ERC20 standard system, the report claims USD-pegged stablecoins are now considered attractive to those seeking to avoid losing large portions of their wealth to price fluctuations – citing information that it claims exists but not publicly available.
“As a matter of fact, QCP Capital a Singapore-based cryptoasset trading firm has witnessed Hong-Kong-based investors fleeing to Singapore and trading stablecoins, predominantly Tether, in an attempt to preserve their wealth,” Amun states noting that the recent demonstrations triggered money flows primarily to Singapore. “According to QCP, 80% of capital has poured into stablecoins while the remaining 20% has gone into Bitcoin.”
This supposed capital outflow from RMB-denominated assets to USD-pegged stablecoins, it says, will strengthen the US dollar hegemony as the world’s reserve currency while interest-bearing accounts could see capital flow from stablecoins to Bitcoin by Chinese institutional investors and high-net-worth individuals.
Billions worth of Ethereum-based ERC20 stablecoins have been issued in recent years with a growing number of crypto and FinTech companies already working on applications to use stablecoins for payments. One of such is USD Coin (USDC) – created by Circle as an ERC20 token before selling its Poloniex exchange to TRON’s Justin Sun – which was recently used by the sixth largest bank in Liechtenstein to effect a tiny fraction of their cross currency settlements.
A trend we are seeing and expecting to surge in the year ahead — regulated banks adding support for USDC, which is becoming an significant alternative rail to value transfer for banks. https://t.co/xGblEbOouT
— Jeremy Allaire (@jerallaire) June 8, 2020
A leading European blockchain bank, Bank Frick added the stablecoin to its range of tradable and custodial crypto currencies for the first time last month to offer professional market participants and wealthy private clients the trading and safekeeping of the USDC.
The move draws more attention to Liechtenstein which gets more banking business interest than their small population suggests due to their popular financial services at a universal level. As one of Europe’s pioneers of the regulated blockchain banking sector, it offers trading and custody of crypto assets, token sales as well as develops tailored crypto-structuring solutions for intermediaries.
While USDC is reportedly planning to scale by using Matic Network to lower its transaction fees and increase its tps to 7,000+, the proof of the stablecoin being used by a family-run bank holding 1.38% of their market share may not be entirely significant. Rather, it is a testament of what is obtainable in small corners of the world as the advantages of new ways of doing business get more known. It also speaks to the growing demand for stablecoins in the space as well as giving room to competition.