Millions of cryptocurrencies pass daily across the Russian-Chinese border, mostly in Tether

Chinese importers buy daily atTether Moscow OTC trading floors (USDT) worth up to $ 30 million. They use cryptocurrency to send large amounts to their homeland, where capital flows are strictly controlled. Moreover, if earlier merchants used Bitcoin for this, but when the market collapsed in 2018, they switched to Tether, which is supposed to maintain parity with the US dollar. Despite the long-standing questions about the transparency of providing USDT tokens, in this market “it doesn’t matter to everyone whether Tether is secured or not.” At least, as one Moscow trader claims.

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Banknote machines hummed quietly in the office with panoramic windows overlooking Moscow sights.

“Do you hear the sound? - asked the head of the over-the-counter cryptocurrency trading platform - let's call him Oleg, since he asked not to disclose his name and the name of his company. “He comes around here around the clock.”

Things go briskly thanks to the constant flowChinese merchants who come here daily with whole bags of cash. According to Oleg, his over-the-counter platform sells cryptocurrencies worth $ 3 million daily. Most usually go to China. But the most amazing thing is what kind of cryptocurrency is it.

Only 20% of Oleg’s sales come from Bitcoin, the oldest cryptocurrency with the largest market capitalization. The remaining 80% comes from a dollar-bound token known as Tether, or USDT.

Tether's most famous use isthat it allows crypto traders to quickly transfer money between exchanges to take advantage of arbitrage opportunities. But, according to several Moscow OTC traders, it has at least one application in the real world - as a payment service preferred by Chinese importers. According to these traders, the total daily purchase volume of USDT by Chinese business can be $ 10-30 million.

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“They accumulate a lot of cash in Moscow, andthey need Tether to send them to China, ”said Maya Shakhnazarova, head of over-the-counter trading at Huobi Russia, the Moscow office of Singapore's Huobi Global exchange, which serves large customers.

The procedure is simple.

“The client comes with cash, we registerthe price on exchanges, and if the price suits everyone, we conclude a deal, ”Shinnazarova told CoinDesk. “The client transfers the cash and the wallet number, and the seller sends him USDT to the wallet.”

Why tether It has the advantages traditional for cryptocurrencies - the absence of limits for the transferred amounts and geographical restrictions - but without the volatility that makes most cryptocurrencies inconvenient for daily sending millions of dollars abroad.

Despite long-standing questions aboutUSDT's claimed dollar security, exacerbated by a lawsuit from the New York State Attorney General to the issuing company Tether, stablecoin typically trades at around $ 1.

Tether purchases for rubles usually occur in places such as the Huobi office in the Moscow City steel and glass skyscraper area

“There are a lot of OTC sites here in Moscow City,several offices in each building, and their total volume can reach several tens of millions of dollars per day. All this is paid in cash, ”said Shakhnazarova.

Breakthrough Tether App

Chinese importers gray bear marketThe 2018 cycle relied on Bitcoin, as another over-the-counter dealer, Roman Dobrynin, told CoinDesk. When the price grew all the time, merchants and intermediaries helping them buy cryptocurrency could receive additional revenue in the process. But since the beginning of 2018, it has become too risky to hope that until the completion of the transfer, the price of BTC will not fall.

“Due to the fall in the price of Bitcoin, it has become muchit’s more convenient to use Tether, said Dobrynin. - The Chinese rely entirely on USDT. They strongly trust him, and besides, he is very liquid. ” Dobrynin’s clients are mainly Chinese, who usually find him on the recommendations of friends and contact via Telegram.

To buy or sell USDT for dollars from Tether itself, a tradermust go through the Know Your Customer (KYC) process.on top of public blockchains(Bitcoin, Ethereum and TRON)anyone can receive or send it, and secondary transactions are not limited.

In China, merchants can easily exchange USDT forfiat currency, despite the fact that the People’s Bank of China banned cryptocurrency trading for fiat currency in September 2017, forcing exchanges to leave the country and leaving only the opportunity to trade cryptocurrency pairs.

Chinese traders who need to withdrawcrypto assets in Chinese yuan can still go to an over-the-counter broker like Huobi and OKEx listed on exchanges, find suitable buyers through it and send them cryptocurrency after receiving a transfer through a bank, AliPay or WeChat Pay.

Tether critics have long wonderedIs the token really provided with 1: 1 dollars, as the company claims. An investigation by the New York State Attorney General revealed that Tether had lent a significant portion of its Bitfinex capital reserves - to an exchange that has common managers and owners with it - so that the token was only 74% backed by cash and cash equivalents.

But it seems that Moscow traders and their Chinese clients are not worried.

“It doesn't matter to everyone whether Tether is provided or not,”says Konstantin Plavnik, operations director of the Moscow cryptocurrency derivatives exchange Xena. Belief in Tether's solvency is based on long-term habit and convenience: Tether is needed by this market, therefore it is trusted.

OTC traders also indicate thatthe daily volume of USDT is several times higher than the offer in circulation, which means that tokens are repeatedly transferred from hand to hand every day. For example, according to CoinMarketCap, on July 29, the daily trading volume of USDT was $ 17.5 billion, while the total supply was only about $ 4 billion.

Tether has a fast turnaround, so formerchants using a token for money transfers, is it worth something or not - it is important only within one day. As Moscow cryptocurrency entrepreneurs told CoinDesk, large amounts of USDT are transferred to China immediately after purchase, and then exchanged for RMB.

“USDT will continue to maintain the power of habit anduser trust, said Vladislav Bulochnikov, Chatex cryptocurrency wallet development manager. “Even if he loses half of his security, he will still be used.”

Bypass capital controls

Chinese authorities tightly control movementcapital, limiting the amount of foreign currency that can be bought or sold, in the amount of $ 50 thousand per year. You can apply for an increase in the quota, but still the amount of currency that can be bought or sold will be limited. In this situation, some Chinese people prefer to use cryptocurrency for international money transfers, as reported by Bloomberg in 2017.

The fact of using cryptocurrency for money transfers by Chinese merchants supplying cheap goods to Moscow markets was actually recognized by the Russian authorities last year.

As said during an event organized byin Moscow in April 2018, Thomson Reuters, Yuri Polupanov, director of the Bank of Russia’s financial monitoring and currency control department, accounts for approximately $ 9.5 billion of unregulated cash flow per month in several large Moscow markets, and most of the trading operators there are Chinese.

In these markets, in huge warehouses aton the outskirts of Moscow, there are retail outlets where mostly clothes are sold, usually cheaply and for cash. These places are popular with those who cannot afford to spend a lot on their wardrobe and avoid even retail chains oriented to the mass consumer.

“We see the acquisition of most of the revenuecryptocurrency, which is not currently taken into account now, said Polupanov at the Thomson Reuters forum, according to RBC news agency. “We see the instantaneous direction of cryptocurrency by e-mail directly to the homeland of these merchants and manufacturers and its conversion already into local currency.”

According to a Novaya Gazeta report for March 2019., cash is accepted in places like the Druzhba hotel, located next to the Moscow shopping center. Then this cash is exchanged for cryptocurrency and sent to Hong Kong.

According to Novaya Gazeta sources, the daily turnover of wholesale exchange offices in Druzhba could be $ 10-12 million.

The operations were temporarily suspended after the March police raids in the hotel and in the markets mentioned by the Bank of Russia.

According to OTC trader Dobrynin, small cryptocurrency offices in these markets are still functioning, but most likely they do not provide the volumes needed by merchants.

According to him, other traders are often afraid to go to these places to conclude deals, as this can be dangerous:

“Those working there can sell to someone information about how much money you have with them, and not the way back can be met by armed people. They go there only with armed bodyguards. ”