Chinese investors are using digital assets to circumvent Beijing’s capital controls and simulate investments in hot US IPOs such as SpaceX and OpenAI, despite concerns the securities may not be legitimate.
The investments rely on “tokens”, digital assets offering synthetic or purportedly asset-backed exposure to the underlying stocks. Chinese investors are funding the trades by buying stablecoins such as USDT with renminbi, in spite of Beijing’s ban on converting fiat money into cryptocurrency.
Demand from Chinese investors for the investment products has surged, with some offerings heavily oversubscribed, according to industry participants. The rush has been so intense that many Chinese investors have bought in without confirming they are backed by actual shares or whether the companies recognise the transactions as equity investments.