Capital flight is when people and businesses move capital and financial assets such as bitcoin or other digital currencies out of the jurisdiction of one nation to another. There are many reasons why people would move their assets out of country, the list includes political or economic instability. One example of this could be due to a situation similar to what happened in Bolivia.
Recently many people of Bolivia were fed up with the policies enacted by the previous president Evo Morales. The people took to the streets and Evo was ejected. Recent elections ended up putting another leftist president back in power which has caused many business owners to begin moving assets out of the country.
Capital flight could either be legal or illegal. This generally depends on the current laws on the book in said country but what we generally see is capital flight occurring from countries that restrict moving capital and assets out of a country. I can see the attractiveness of digital currencies to help individuals move capital from one jurisdiction to another.
People should be free to move capital around the globe but capital flight can have detrimental impacts to less wealthy countries since economic growth depends on this capital. When countries experience capital flight and there is very limited foreign investment they will likely experience a lower standard of living and cause the poor people of a country to feel the greatest impact.
In some countries such as China citizens are limited on the amount of foreign currency they may buy. In China the Chinese Communist Party (CCP) imposed a limit of $50k worth of currency exchange per person in a single year. This is where crypto currencies may benefit individuals who wish to stash away some money in case of a severe economic disaster in their home country.
Some estimates run as high as $50 billion worth of crypto leaving China every year. This could be one reason why the CCP is now issuing crypto to the Chinese people. The more control the CCP has over digital currencies the easier it will be for the CCP to track and control the amount of currency leaving the country.
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