Tether's Global Dominance: Highest Adoption in Asia, Accounting for 93% of All Stablecoins

Despite the rapid growth of cryptocurrencies in Africa, evidenced by increasing Google Trends and trading volumes month over month, data shows that East Asia is actually the largest trading market globally. Over $50 billion worth of cryptocurrency moved from East Asia to addresses in other regions over the course of a year, potentially indicating capital flight using the stablecoin USDT.

Chainalysis's summary of this year's Cryptocurrency Geographic Report points out that East Asia accounted for 31% of all on-chain transaction volume in the past year, receiving over $107 billion worth of cryptocurrency, 77% more than the second-ranking Western Europe. The report attributes this to the thriving Bitcoin mining industry in Asia, with China alone controlling nearly 65% of Bitcoin's hash rate.

Altcoin Traders Lead East Asian Market

Approximately 90% of the total trading volume in the East Asian market involves transfers valued at over $10,000, a level only matched by North America and Western Europe in the past year.

An interesting observation is that professional traders in regions like North America tend to focus more on Bitcoin, while data suggests that East Asia engages in a larger proportion of speculative trading activities, with altcoins accounting for the highest at 16%, compared to Bitcoin's lowest at 51%.

Despite East Asia remaining the largest cryptocurrency market, there has been a decline in on-chain activities since October last year, attributed by Chainalysis to the exposure of the Ponzi scheme PlusToken. Chainalysis consulted Dovey Wan, co-founder of Chinese blockchain investment firm Primitive Ventures, who believes this to be a contributing factor.

Higher Adoption of Stablecoins

Driving the development of the crypto industry is not just Bitcoin, as 33% of on-chain transaction value comes from stablecoins, with Tether being the primary player. In June, Tether surpassed Bitcoin to become the most adopted cryptocurrency in East Asia, occupying 93% of the stablecoin market value in the region.

Chainalysis notes that this is a result of the Chinese government's decision to ban cryptocurrency trading in 2017, making Tether a de facto fiat alternative for Chinese users who can still acquire USDT through foreign accounts, OTC markets, and other means. Paolo Ardoino, CTO of Tether, stated:

Tether is not a fiat substitute or a panacea. While it may not be suitable for buying coffee, its fast settlements, high liquidity, low fees, and stable price provide significant assistance to crypto traders, cross-border remittances, lending products, and offer an alternative for people in countries with severe inflation.

Dovey Wan also pointed out:

Strict capital controls in China are the main factor, with Tether effectively becoming a substitute for the US dollar for many Chinese, including numerous domestic and foreign companies that accept Tether. The extent of its use cases in this regard cannot be understated.

East Asia - The Largest Crypto Trading Market

Data indicates that East Asia is a crucial player in the global crypto market, with trading volume surpassing Western Europe by 78%. The value transferred from East Asian addresses amounts to $50 billion, compared to $38 billion in Western Europe.

Chainalysis attributes this primarily to mining output in East Asia, followed by capital outflows from China. China only allows individuals to transfer up to $50,000 worth of funds annually, prompting the upper class to invest in foreign real estate and other assets to circumvent this restriction, with cryptocurrencies potentially playing a role.

There have been significant outflows of USDT during major policy shifts in China, including President Xi Jinping's endorsement of blockchain technology as mainstream in October last year, and during the financial market impact and currency devaluation amidst the COVID-19 outbreak in March.

Overall, Chainalysis suggests that this indicates the significant role East Asia plays in the global cryptocurrency economy, with China expanding its influence through initiatives like the Belt and Road, regardless of the authorities' intentions, the data shows that cryptocurrencies are serving to further this goal.