April 19, 2024
Latest Cryptocurrency News

Evergrande’s $330 Billion Debt Crisis Sparks Cryptocurrency Turmoil and Economic Uncertainty

Amid Evergrande’s staggering $330 billion debt load and its late 2021 default, a ripple effect has emerged. This cascading impact has reverberated throughout the cryptocurrency sphere, triggered by China’s Evergrande Group’s recent bankruptcy filing, which has cast doubt on the stability of Tether, a prominent stablecoin. Once the pinnacle of China’s property development sector, Evergrande has now become a symbol of the ongoing real estate crisis in the country.

On August 17, Evergrande sought refuge from its creditors by invoking Chapter 15 protection under the US bankruptcy code. This provision offers non-US companies a shield during restructuring, allowing them to stave off creditors. Following suit, Evergrande’s affiliate, Tianji Holdings, pursued a similar course in a Manhattan bankruptcy court. This development underscores the mounting concern that the property sector’s distress could spill over into other segments of the economy, particularly as growth falters.

With Evergrande grappling with an astronomical $330 billion in liabilities and having defaulted in late 2021, a domino effect has been set in motion. Since the debt crisis emerged in mid-2021, companies responsible for 40 percent of Chinese home sales have defaulted, leaving behind a trail of thousands of unfinished homes and unsettled investors.

However, Evergrande is not simply folding its cards. Restructuring negotiations are underway in Hong Kong, the Cayman Islands, and the British Virgin Islands. In the upcoming weeks, creditors may cast their votes on a restructuring plan, with potential approval from the courts in Hong Kong and the British Virgin Islands as early as September.

Photo by Nicola Barts

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