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Today, Chainalysis, the blockchain data platform has published Why Is China Launching the Digital Yuan?; a new report, which analyses the country’s historic cryptocurrency activity amidst government crackdowns.
Click here to download the full report.
Some key takeaways:
- Digital Yuan: China appears intent on developing a digital yuan for immediate domestic use, and possibly future international use. Improved monetary policy and financial surveillance of Chinese citizens appear to be the project’s short-term goals, but in the long term, the proliferation of the digital yuan alongside other CBDCs could compromise the U.S. dollar’s status as the world’s reserve currency.
- Yaya Fanusie, an Adjunct Senior Fellow at the Center for a New American Security (CNAS), outlined ways financial data generated by the digital yuan could be combined with other types of data that feed into China’s controversial social credit system. “The CCP recently released a notice that Mongolian families who didn’t send their children to state-mandated schools would be put on a blacklist. The digital yuan would allow the government to combine financial data with lists like that.”
- Illicit Activity: Between April 2019 and June 2021, Chinese addresses have sent over $2.2 billion worth of cryptocurrency to addresses associated with illicit activity such as scams and darknet market operations, and received over $2.0 billion. However, China’s transaction volume with illicit addresses has fallen drastically over the time period studied, both in terms of raw value and in relation to other countries.
- Crackdown Impacts: Starting in mid-May, soon after the announcement of China’s crackdown, mining pools began receiving less newly mined Bitcoin, with weekly volume falling from roughly 10,000 BTC per week to under 5,000.
