TPan here! I’m taking a break so I won’t be writing my usual pieces. However, I do have some great content for you from others in the space.
Today, we have Yaling Jiang with a piece on crypto and web3 developments in China and Hong Kong. I met Yaling online earlier this year and have found her insights to be helpful as the adoption of blockchain tech has accelerated across Asia.
Yaling is the author of Following the Yuan, a publication that focuses on interpreting the nuance of the Chinese consumer market and web3-related policies. She has written for the South China Morning Post, Wired, and Vogue Business, and consults with brands that are entering China’s web3 space.
If you want to check out more of Yaling’s work, subscribe to her Substack and follow her on Twitter.
As Hong Kong emerges as one of the world’s few bright spots for Web3 policies and crypto parties this year, there has been a good deal of expectation on how it could spark another bull market. At the same time, there also arises an increasing amount of misinformation.
As someone who aims to be the connector of China’s Web3 and the English-speaking world, I’m all for Hong Kong’s pro-crypto stance but it pains me to see how the misinformation could hurt and hinder the goal of mass adoption of web3 technologies.
Here, I want to tell you a bit about why that’s happening and some tips to keep in mind when you read about Hong Kong and China Web3 news.
Why is there so much misinformation?
One contributing factor to the spread of misinformation is the presence of language barriers and the influence of key opinion leaders who may misinterpret or misrepresent the source information. In some cases, misinformation arises from a lack of basic understanding of China and its governance of Hong Kong.
A recent example occurred when Binance CEO CZ Changpeng Zhao tweeted about Beijing releasing a Web3.0 Whitepaper, suggesting a bullish stance on crypto by the Chinese central government.
However, the 98-page document actually pertained to Beijing municipality's Internet 3.0 vision, which focuses more on the metaverse and had little to do with crypto. The tweet garnered significant attention, leading to misleading media coverage in English and false impressions that China was reversing its previous crypto ban [Chinese], which deemed all crypto-related business activities as illegal. [read my clarification here]
We also cannot rule out the possibility that some players in the communication chain knowingly act with their own short-term agenda to hype up their projects in relation to HK.
This kind of misinformation has significant implications, as it could lead companies and individuals to make erroneous decisions, such as selling or marketing their tokens or NFTs in mainland China, or for the latter, investing in fraudulent schemes that falsely hype their potential in the Chinese market.
What’s worse, the mass audience has long believed web3/crypto to be non-transparent and full of scams and liesMore misinformation would only deviate mass adoption.
The bottom line
Since 2013, China’s government agencies have been releasing legal prohibitions but a comprehensive move — the crackdown on cryptocurrency — did not arrive until 2021. In the meantime, blockchain companies that leaned in with Beijing provide applications in legal, centralized finance management and most recently, digital collectibles (NFTs on consortium blockchains), according to my analysis of 3,193 companies registered with the Cyberspace Administration of China since February 2019.
In the majority of the cases in China, blockchain services are either private or consortium, which can be managed in a centralized manner, instead of public and permissionless ones like Ethereum.
Under this heavily regulated space, there is one exception. Conflux Network, a multi-chain ecosystem founded in 2018 by graduates from the prestigious Yao Class of Tsinghua University, is currently operating as the only public chain platform in mainland China.
In a previous conversation, Conflux’s co-founder Dr. Fan Long, who splits his time between a teaching role at University of Toronto and Shanghai office, told me that he believes that the company benefits from three distinctions:
It never crossed the red lines set by the Chinese government such as “raising funds directly from the public” [IPOs were banned in China in 2017];
It allows users to interact with the blockchain without the need to be a holder of digital assets.
And the most important thing is to have a communication channel with the regulators, he said. “Talking with the regulators often means that you need to be patient when you tell them what you're doing, why these technologies are great, you also need to sometimes educate them on how they can adapt to new technologies – this takes a lot of time and energy,” Fan said. “Most people in [the blockchain industry] do not have the patience.”
Hong Kong’s potential
Last November, the Hong Kong government announced its pro-crypto stance during the fintech week, signaling its intent to establish itself as a leading crypto hub in Asia and compete with Singapore in terms of web3 talent and status.
As of June 1 this year, crypto exchanges must seek a license with the Securities and Futures Commission to sell and market to retail investors in the region. Authorities said that over 80 foreign and mainland China companies, including OKX, Binance, Huobi and Hashkey have expressed interest. Previously, Hong Kong consumers could trade crypto but it wasn’t regulated.
Moreover, since the initial announcement in January, the Hong Kong Monetary Authority said in June that it aimed to introduce a regulatory framework by the end of 2024.
As one of Asia’s financial hubs, HK’s large pool of wealth and unregulated market pre these official moves contributed to the birth of the now infamous FTX, among others. It certainly has the potential to turbocharge growth for startups with a more defined legal landscape.
The impact of Hong Kong's pro-crypto stance has extended beyond its local market, also drawing attention from mainland China, which has many Web3 talents and start-ups working under the table. They like to seek funding and come out in the public eye, and from what I’m seeing over the Hong Kong Web3 Festival in April, many of them are happy to relocate to Hong Kong for those reasons and for the abundant incubation programs.
From a personal perspective, I think China is doing this as an experiment partially to maintain political and financial stability as the region’s economy took a hit after the social unrest in 2019 and during Covid.
HK needs to win back talent and win back its status as a financial center and digital asset hub, which could ultimately benefit China. That’s why you can see government agencies like InvestHK running all over the place, including setting up a trade booth at Web Summit Rio and luring students from top U.S. universities like Stanford.
What to keep in mind
1. China’s stance on Web3 has been consistent: first and foremost, there’s no pedaling back on the 2021 crypto ban.
Basically, Web3 in China is free from crypto, free from public blockchain and free from decentralization. One thing to note is that the ban was more about holding companies and platforms accountable, instead of punishing individuals.
2. Whatever the Hong Kong government says, it doesn’t represent China.
It is likely that many English readers are not aware of Hong Kong’s separate legal system. Since HK has been recognized as a Special Administrative Region of China after the British handover in 1997. Under the principle of 'one country, two systems', the HK SAR legal system is based on the common law and is separate from mainland China.
3. Go to the source of information or credible journalists.
It’s clear that sometimes the news writers haven’t read the source documents, or they don’t read Chinese. It’s also possible that some crypto media choose clicks over accuracy. This one, for example, equated Web3 with the metaverse in the title when reporting on Shanghai’s regional policy about metaverse tourism, which is something I wouldn’t do.
In these cases, I tend to find the source documents and judge myself. And I rely on solid reporting from the likes of SCMP’s Xinmei Shen, Rita Liao from TechCrunch and Timmy Shen from Forkast News.
I always appreciate international perspectives when it comes to web3, as it reminds me of a saying I repeat here and in person: It’s not about you.
It’s about the future generations that will grow up with blockchain technology (similar to how children are growing up with screens and tablets today). It’s about people halfway around the world who are beginning to use this technology on a daily basis, whether they know it or not. It’s about countries that are embracing web3 instead of regarding it as a threat.
If you enjoyed this piece from Yaling, check out her Substack and follow her on Twitter.
See you Thursday!
