China’s Middle Class is Investing in Crypto, but Only Accounts for 10%

Despite the Chinese government’s frequent warnings and unprecedented actions to block their citizen’s access to cryptocurrency, the country’s middle class is becoming increasingly interested in cryptocurrencies as an investment vehicle.

Although the middle class is expressing more interest in digital currency investments, the government’s anti-crypto actions have been effective, making it significantly harder to access digital investments than in other, freer, countries.

A recent report, titled The New Middle Class, analyzes the investments and spending habits of the Chinese middle class, and for the first time ever, added Bitcoin and other cryptocurrencies as investment options, reports Tech Node.

The report concludes that 10% of China’s middle class has invested in cryptocurrency, coinciding with the growing popularity of cryptocurrency in China despite the government’s ban. Although there is interest in cryptocurrency among the middle class, it is currently the least popular investment when compared to private equity, cash savings, and precious metals, and funds.

The paper, which was published by famed financial writer Wu Xiaobo, notes that the middle class in China is incredibly risk adverse and are mainly concerned with stable financial growth. When taking into consideration the volatility of crypto and the risks of obtaining and trading the digital assets with the government’s ban, 10% suddenly seems like an incredibly high rate of middle class crypto ownership.

China’s Government Clamping Down Amidst Growing Illicit Cryptocurrency Ownership 

The Chinese government has been struggling to fully reduce the amount of cryptocurrency ownership within the country.

The People’s Bank of China (PBoC) recently released a warning to citizens that outlined the dangers posed by cryptocurrencies, and specifically Initial Coin Offerings (ICOs). The latest warning came just over a year after the authorities banned ICOs.

The PBoC notes to investors that in addition to being risky, ICOs are also “suspected of illegally selling tokens, illegally issuing securities, illegal criminal activities, financial fraud, pyramid schemes and other illegal and criminal activities.”

Although the ICO and cryptocurrency ban have been successful, reducing global Yuan trading volume from 90% to less than 5%, citizens are still buying and selling cryptocurrencies by using multiple methods to access them.

Virtual Private Networks (VPNs) are one method that some Chinese citizens are using to access offshore exchanges, which allows them to access foreign domains without being blocked by the government’s internet safe-guards that restrict the free flow of information and sites.

Another way in which investors are circumventing the ban is by conducting peer-to-peer transactions, where a buyer and a seller utilize cold-storage solutions to exchange fiat currency for digital currency, which, although effective, can make it hard for investors to rapidly sell their holdings.

Some cryptocurrency exchanges are also catering to “underground” Chinese cryptocurrency investors, utilizing frequently changing domain names in order to bypass the government’s efforts to block the domains of well-known exchanges.

Chinese companies are also working with the PBoC to eliminate illicit trading activities, with social media platforms like WeChat and Tencent, banning cryptocurrency news publications and banning users trying to sell cryptocurrencies.

Featured image from Shutterstock.