#517
Capital Controls and Fiat Fatigue
Published:
Dec 04, 2023
Author:
Sarah Parsons Wolter
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After the expiration of COVID precautions in China, wealthy Chinese citizens have been moving billions of dollars out of the country. With the freedom to travel internationally, they are now investing in overseas assets like apartments, stocks, and insurance policies. Some are even resorting to creative methods to bypass China's strict controls on money transfers abroad, such as smuggling gold bars and packing foreign cash in their suitcases. Like high-waisted jeans or vintage jackets, maybe gold is back in style.
As China's economy faces challenges, Chinese individuals are turning to gold as a store of value. This trend is not limited to China; in economically unstable regions like parts of Latin America, people are reevaluating their local fiat currencies. In Argentina, many workers now receive their wages in USDT, a US dollar-denominated stablecoin, to combat the staggering inflation rate of over 143% per year. The shift away from local currencies is gaining momentum, especially with the election of Argentina's new president, Javier Milei, who plans to implement radical monetary policy reforms. These include shutting down the central bank, adopting the US dollar as the national currency, and embracing decentralized finance, a stark departure from the country's current financial strategy. New currency, who’s this?
This global trend of reevaluating local currencies presents opportunities for emerging fintech and cryptocurrency applications. PayPal introduced its US dollar-backed stablecoin, $PYUSD. Other major players like Visa and Mastercard also recently entered the stablecoin space: Visa launched support for USDC stablecoin payments on the Solana blockchain, and Mastercard launched a stablecoin digital wallet integration with start-up Stables. The future of fintech may see stablecoins becoming a standard feature in the industry as countries and individuals seek alternatives to their local currencies. So, in the good words of the theme tune to Michael Caine’s 1969 epic, The Italian Job… Get a Bloomin' Move on, as that’s gotta be easier than shifting around tons of gold!
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Capital Controls and Fiat Fatigue
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