The recent depreciation of the Chinese yuan (CNY) has caught the attention of crypto analysts, who suggest that the weakening currency could drive capital outflows, potentially benefiting Bitcoin (BTC) as a safe haven.

On Tuesday, the People’s Bank of China (PBOC) set the official yuan reference rate at 7.2038 per U.S. dollar, the weakest since September. Unlike free-floating currencies like the U.S. dollar or euro, the yuan is managed by the PBOC, with the central bank setting a daily reference rate and allowing it to fluctuate within a 2% range.

The 7.2 level has long been considered a critical threshold for China’s central bank, which has maintained the yuan below this level in recent years. By allowing the currency to weaken past this mark, analysts believe the PBOC is signaling a more aggressive approach to yuan depreciation. This move could help make Chinese exports more competitive in global markets while mitigating the effects of tariffs imposed by U.S. President Donald Trump.

Capital Flight Could Benefit Bitcoin

As the yuan weakens, analysts anticipate that capital outflows from China could accelerate, and cryptocurrencies, particularly Bitcoin, may benefit from this shift.

Markus Thielen, founder of 10x Research, highlighted that the increasing U.S. economic pressure on China could prompt the Chinese government to further devalue the yuan and implement measures like quantitative easing. If China allows capital flight, Bitcoin could see substantial inflows, similar to the surge it experienced following the yuan’s devaluation in 2015.

In August 2015, China devalued the yuan by 1.9%, triggering a shock to global financial markets. Bitcoin initially fell with the broader market but quickly recovered and surged by nearly 60% in the following months.

Ben Zhou, CEO of Bybit, echoed Thielen’s view, suggesting that the yuan’s depreciation tends to lead to an influx of capital into Bitcoin.

“Historically, when the RMB weakens, Chinese capital tends to flow into BTC, which is often a bullish indicator for Bitcoin,” Zhou commented on X.

Challenges from China’s Crypto Regulations

Despite historical trends that suggest yuan depreciation could benefit Bitcoin, analysts caution that China’s strict regulatory stance on cryptocurrency could complicate matters.

Earlier this year, China introduced new regulations that require banks to monitor and report international transactions involving cryptocurrencies, increasing the scrutiny on digital asset movements. Any suspicious transactions involving crypto could result in significant penalties for traders, including blacklisting and financial restrictions.

Furthermore, China’s Supreme People’s Court has heightened legal risks for individuals using cryptocurrencies, particularly in cases related to money laundering, which could be extended to capital flight cases. These regulatory measures create significant barriers for domestic investors looking to move funds into Bitcoin during periods of economic instability.

Thielen noted that while the depreciation of the yuan might create an environment favorable for Bitcoin, China’s heavy-handed crypto regulations could deter local investors from moving their capital into digital assets.

“While a weaker yuan could prompt capital flows into Bitcoin, China’s stringent regulatory environment may prevent this from happening at scale,” Thielen warned.