On January 8, China-based blockchain security firm Peckshield published its “2019 Global Digital Asset AML Research Report” noting a variety of crypto trends throughout the year. According to the study, cryptocurrency-based capital flight stemming from China was around $11.4 billion in 2019. Peckshield’s research recorded a number of illegal or otherwise unregulated transactions over the last few years.
International Unregulated Capital Flow Using Cryptocurrencies Surges in 2019, While China Saw $11.4 Billion in Capital Flight Crypto Transactions
In January 2017, the Chinese government and the People’s Bank of China (PBoC) banned domestic cryptocurrency exchange operations. However, despite the ban, Chinese citizens have been able to access digital assets via over-the-counter platforms and offshore exchanges. Peckshield, a blockchain research firm from China, published a report which shows Chinese residents are still leveraging cryptos on a regular basis.
According to the study, roughly $11.4 billion in capital flight crypto transactions derived from China. The number is less than 2018’s $17.9 billion but more than 2017’s $10.1 billion. 2019’s unregulated capital flows from China represent more than 1% of the country’s foreign exchange reserves. Peckshield’s study notes:
International unregulated capital flows: The flow of funds using digital assets as a carrier has been huge internationally, but the legal definition of digital assets such as bitcoin in different countries is still very vague, meaning that these liquid funds have not been reasonably regulatory compliance.
MLM Crypto Scams and Darknet Market Bitcoins
Peckshield’s research utilized full nodes from a variety of blockchains and parsed the public data storage files deriving from chains like BTC, ETH, EOS, and TRX in real-time. The study also highlighted the major multi-level-marketing crypto scams that plagued China and many other regions worldwide. Peckshield mentioned how the Ponzi Onecoin managed to siphon $4 billion before the scam ended. The study also emphasized the Plustoken project which managed to defraud Chinese and international investors by running away with more than 200,000 BTC, 780,000 ETH, and 26 million EOS. Peckshield’s research notes that 3 million people were scammed by Plustoken and “the impact is very wide and the damage is huge.”
In addition to detailing the capital flow from Chinese citizens using cryptocurrencies, Peckshield’s report discusses darknet market (DNM) bitcoin growth. Peckshield claims there are about 60,000 darknet websites running on the invisible web and DNM transactions spiked considerably in 2019. In 2018, Peckshield data shows that 334,329 BTC flowed into DNMs but the following year the number jumped to 546,825 BTC.
Peckshield’s deep web research stressed the firm analyzed DNM page structures, content, and discovered a large number of digital asset addresses used within the invisible web. Out of the 546,000 BTC, Peckshield discovered that the total number of BTC flowing directly from DNMs into major exchanges was 29,471 BTC. The study emphasizes that only a small fraction of DNM funds flows into major trading platforms but small amounts of DNM funds are sent to exchanges every single day.
Peckshield’s report has five separate chapters of comprehensive crypto data in regard to DNM money flow and capital flight from an array of countries like China. The researchers note that overall BTC circulation on the invisible web is growing but it’s a “relatively stable amount determined by market demand.” On the other hand, “the current unregulated asset flow has occupied a considerable market share.” In Peckshield’s opinion, “accelerating compliance has become an urgent matter” as far as the global digital asset environment is concerned.
What do you think about the capital flight leveraging cryptocurrencies in China? What do you think about Peckshield’s data in regard to DNM funds in 2019? Let us know what you think about these topics in the comments section below.
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Image credits: Shutterstock, Peckshield’s research, Wiki Commons, Fair Use, and Pixabay.
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