Bitcoin's Capital Controls Resistance a Concern says IMF as $1 Trillion Leaves China – Bitcoin News


Bitcoin's Capital Controls Resistance a Concern says IMF as $1 Trillion Leaves China

Fiat currencies and commodities have been sliding downwards against the US dollar for some time as investors are closely watching China and its floundering economy. With the Shanghai Composite Index in a downward spiral, reports of rumored tighter capital controls in China continue to build. In result, Bitcoin may once again experience a windfall as Beijing tightens its grip to prevent capital from fleeing offshore. However, authorities are well aware of cryptocurrencies, and the subject has come up in certain think tank reports, the IMF, and during the recent World Economic Forum (WEF) in Davos.

Also read: Bitcoin-Core Team Asked To Denounce Censorship

IMF: Bitcoin a ‘Powerful Tool’

CurrenciesAt the WEF conference in Switzerland, executives, government representatives, innovators, and economists met at the annual meeting to discuss the global economy. Discussions at the event revolved around new economic emergents and concepts that are transforming global trade. In addition, innovations in fintech such as distributed ledgers were discussed a great deal. One aspect in some of these conversations was China’s economy and how capital outflow is becoming a real concern. Bloomberg reports that almost $1 trillion USD in wealth has left the country already in recent months.

On the last day of the WEF event, the Bank of Japan Governor Haruhiko Kuroda suggested that the country’s leaders exercise curbing the wealth leaving China. IMF Managing Director Christine Lagarde was asked about the Japanese Governor’s statement. “The massive use of reserves would not be a particularly good idea,” she explained.

Many people believe that Chinese citizens’ money can be transferred securely and without third parties with Bitcoin. At the conference, the IMF Director Christine Lagarde presented the paper Virtual Currencies and Beyond: Initial Considerations,” at the Davos meeting showing some of the featured highlights the organization had discovered about cryptocurrency.

Lagarde acknowledged the positive aspects of virtual currencies that they refer to as “VCs.” The IMF Director said that “Virtual currencies and their underlying technologies can provide faster and cheaper financial services, and can become a powerful tool for deepening financial inclusion in the developing world.” Nevertheless, she also noted some challenges:

The challenge will be how to reap all these benefits and at the same time prevent illegal uses, such as money laundering, terror financing, fraud, and even circumvention of capital controls.

CurrenciesThe IMF’s report presented the organization’s research on what these digital currencies mean to the global economy, most notably to regulators. The paper begins by saying “new technologies—supported by advances in encryption and network computing—are driving transformational change in the global economy, including in how goods, services, and assets are exchanged.”

The 42-page document details some insightful information concerning Bitcoin and cryptocurrencies as well as blockchain technology. The report goes into the typical narrative and most common explanations given by authority figures just discovering the virtual money. What is notable is that they believe that the “risks” associated with the VCs and the “VC-related activities” can be mitigated but not shut down due to its borderless nature. “Jurisdictions have taken different approaches towards mitigating the potential risks of VCs and regulating VC-related activities,” the paper reads.

CurrenciesEU officials know that this could be a result of virtual currencies as they also reveal in their new report. But attempting to circumvent capital controls may be somewhat of a false hope as they will be imposed swiftly. The world saw how fast tax agents stormed the residence of Craig Wright when he was thought to be Satoshi. Therefore, it is likely that authorities tighten their grip on offshore wealth movements, and will also try and regulate decentralized currencies like Bitcoin.

China’s Own Cryptocurrency?

Another important aspect of the story is centralized competition, which seems to be a prevalent idea within the traditional central banking sector. Just recently, the People’s Bank of China (PBOC) had issued a statement about conjuring up their own cryptocurrency. The R&D going into creating a digital currency for China is backed by PBOC, Citibank, and Deloitte. A centralized currency would have a “positive and practical significance,” reads the statement. It appears that centralized cryptocurrencies are certainly on the horizon given these kinds of efforts. This initiative could also set off a domino effect towards a decentralized currency like Bitcoin though this may also cause a knee-jerk reaction from regulators.

CurrenciesThis does not mean that Bitcoin-enabled financial sovereignty is not a good idea or that it won’t happen. Quite the contrary, as the currency is one of the only forms of money that does not require a middleman provides users full control over their funds.

It is a well-known fact that governments and organizations will seek to establish greater control over the money global citizens hold. Bitcoin is pure dissent against centralized power, and this might be why some in Davos wanted to talk blockchains instead of the decentralized currency.

We can’t predict what exactly will happen with China’s economy and if capital outflow will boost Bitcoin. Though, it is certain that many eyes are not only closely watching China but also the developments in the cryptocurrency space. But ultimately, the choice will be up to users to decide which form of money is best: centralized or decentralized

Do you think Chinese outflow might trickle into Bitcoin? Let us know in the comments below!

Tags in this story
Capital Outflow, China, Christine Lagarde, IMF, WEF Davos

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Jamie Redman

Jamie Redman is the News Lead at News and a financial tech journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for Bitcoin, open-source code, and decentralized applications. Since September 2015, Redman has written more than 6,000 articles for News about the disruptive protocols emerging today.

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