Although the Chinese government is clamping down on cryptocurrencies, Chinese investors remain keen on owning digital assets and tokens. The Asia Times reported on Sept. 28 that the Chinese people have grown accustomed to the strongly interventionist communist government and have looked to peer-to-peer cryptocurrency trading approaches to gain access to these digital assets.
Investors Diversify Portfolios With Cryptocurrencies
Technode reported that, according to the 2018 White Paper on the New Middle Class, published by Wu Xiaobo, a well-known university professor and financial writer, digital assets and tokens occupy approximately 10 percent of the Chinese new middle class’ portfolios. It appears as though Chinese investors are quite interested in cryptocurrencies despite the government’s cryptocurrency ban back in Sept. 2017.
The report was originally designed to gain a greater understanding into Chinese middle class’ purchasing, family, career, investment, and value profiles. And it’s the first time that cryptocurrencies have been included in the yearly report as a key asset in a Chinese citizen’s portfolio.
But cryptocurrencies are very volatile and quite risky. Thus, while cryptocurrencies help Chinese investors diversify their portfolio, it’s highly unlikely that Chinese middle-class investors would invest more in cryptocurrencies since the Chinese new middle class is quite risk-averse, with only over 9 percent of people willing to accept a loss of over 15 percent.
When it comes to volatility, cryptocurrencies are highly fluctuating assets. In Jan. 2018, the cryptocurrency industry was worth $830 billion. According to CoinMarketCap, the cryptocurrency market fell significantly from its all-time high, losing approximately 70 percent of its value over the last nine to 10 months. The cryptocurrency market currently sits at $218 billion as of Sept. 29. But while these numbers appear grim, the cryptocurrency market has been quite resilient in the past and has managed to bounce back fairly well.
Moreover, cryptocurrencies could be seen as a great tool to hedge and protect wealth in some parts of the world. While this approach may not be so evident in the West, many countries with economic instability, political upheaval, and high inflation like Venezuela and Turkey have looked to cryptocurrencies as a currency and storage of value.
China Continues to Crack Down on Cryptocurrencies
The Chinese government has continued to implement further restrictions to limit the number of cryptocurrencies within the country. The People’s Bank of China (PBOC) also warned the general public of the problems and complications concerning cryptocurrencies and initial coin offerings (ICOs). The Asia Times, however, noted that the PBOC’s stance toward the cryptocurrency industry is quite common since central banks are generally not keen to promoting a decentralized currency that “puts control back into the hands of the people.”
In Beijing, the government also censored social media and messaging apps such as WeChat for any terms related to cryptocurrencies. They’ve blocked groups and forums that have openly discussed cryptocurrencies. The censoring has also extended to any cryptocurrency-related payments on platforms like WeChat Pay or AliPay.
Said an Ant Financial spokesperson to Fortune:
“Alipay has always adhered to the principle of not providing services to virtual currency transactions … We will continue to closely monitor over-the-counter trading activities on a daily basis. Once we find any suspicious crypto-related transactions, we will take appropriate measures immediately, including but not limited to: suspension of fund transfer functionality of any Alipay accounts used by companies for crypto-related transactions.”
While the Chinese government has banned all domestic cryptocurrency exchanges, Chinese citizens have instead looked to direct peer-to-peer cryptocurrency platforms as a way to purchase digital tokens. They’ve also used virtual private networks to access cryptocurrency exchanges that are blocked in China.