New China Report “The New Middle Class” Shows Investors Are Diversifying, 10% Picking Bitcoin
Even though China’s government has taken a hardline stance against cryptocurrency, the country’s middle class has gotten involved in investing in the asset. At this point, current studies show that around 10 percent are investing, and it is expected that the government’s anti-stance is causing the numbers to waver.
In a report titled The New Middle Class, bitcoin was listed as one of the investment options that the middle class is taking advantage of. The report also determined that 10 percent of the country’s middle class has invested in crypto in China, despite the government’s ban.
Wu Xiabo, the author of the report, surmised that China is very risk averse and is mainly concerned with stable financial growth. Taking into consideration crypto’s volatility and the risks of obtaining and trading the digital asset with the government ban in place, the 10 percent seems quite high.
The country’s government has been struggling to reduce crypto ownership. Recently, the People’s Bank of China released a warning outlining the dangers posed by crypto and especially, Initial Coin Offerings. The latest warning was released over a year ago when authorities banned ICOs.
The Bank also notes that ICOs are not only risky, but they are also,
“suspected of illegally selling tokens, illegally issuing securities, illegal criminal activities, financial fraud, pyramid schemes, and other illegal and criminal activities.”
Though ICO and crypto bans have been successful and have reduced global Yuan trading volume from 90 to 5 percent, citizens are buying and selling crypto using various other methods. For example, the Virtual Private Network (VPN) is one method and it allows users to access offshore exchanges and it allows them to access foreign domains without being blocked by the government’s internet safe-guards restricting the free-flow of information and sites.
A second method is investors are circumventing the ban by conducting peer-to-peer transactions, where a buyer and seller utilize cold storage solutions to exchange fiat currency for digital. Though this is an effective option, it also makes it difficult for investors to sell their holdings quickly.
A third option is an exchange that caters to “underground” Chinese crypto investors. This type of exchange utilizes frequent changing domain names to bypass government efforts to block domains of well-known exchanges.
Each of these options are possible, even though there are numerous companies working with the bank to eliminate such trading activities.