Li Qiyuan: Bitcoin exchanges reveal the true USD/RMB exchange rate

Occasional price differences between Chinese exchanges and bitcoin exchanges elsewhere can give users an idea of ​​the true dollar/yuan exchange rate above and beyond the official published rate, BTCC (Bitcoin China) CEO and Bitcoin Foundation board member Li Qiyuan told Bitcoin.com .

Displays the "real" RMB/USD exchange rate

The RMB is a constrained currency, with 1 US dollar equal to approximately 6.5 RMB, and the RMB cannot be traded freely in the market.

Also, in other countries with controlled currencies, black market currency exchange is very popular, especially for Chinese who want to convert RMB into US dollars. Black market exchange rates often give a truer indication of the true value of legal tender.

How does the exchange rate change from day to day? Unless you can get the information directly from a street money changer in China, it's hard to find out.

    “The bitcoin price in China fluctuates within their own market,” Li said. “The ways to flow RMB in or out here are inflexible and limited. So the arbitrage opportunities are limited in a sense.”

The difference between the dollar and yuan prices, he added, depends mainly on the official exchange rate released by China. Whether the price of Bitcoin is high or low in China, it actually reveals the black market (or "real") exchange rate.

You can see the same phenomenon in Latin America, for example in Argentina. He continued

By looking at the price of Bitcoin in China, against the U.S. dollar, you divide it by the official exchange rate, and when the exchange rate fluctuates, you can deduce the black market price.

For example: We say the official exchange rate is 1 dollar = 6.5 yuan. If you divide the (bitcoin exchange) yuan price by 6.5, you will find that it is higher than the trading price of one dollar, which means that the supply of bitcoin is short and people are willing to pay more yuan for bitcoin, he added. "This means that the black market rate is actually higher than 6.5, and the yuan is lower than its official rate."

In the same vein, Bitcoin offers Chinese a way to get their money out of the country, but it's not that easy. Some people may choose to use Bitcoin if other options are unavailable.

“Bitcoin has no limits. You can buy and sell as much as you want. It’s a very interesting topic,” Lee explained.