#hongkong
Just after the Chinese New Year, on the day before the Chinese lunar calendar's "February 2, Dragon Rising", the Hong Kong Securities and Futures Commission announced a consultation on proposed regulations applicable to operators of virtual asset trading platforms, with a deadline of March 31. If nothing unexpected happens, the new system will take effect on June 1. Along with it comes the permission for individual retail investors to trade and invest in cryptocurrencies. For a time, Hong Kong became the focus of discussion in the crypto market, and the East leading the West became a new theme.
There were actually many signs before this policy was implemented. For example, the web3 conference held in Hong Kong in January attracted the attention of many crypto leaders. At that time, Singapore was still considering banning individuals from trading cryptocurrencies, and the United States was still investigating the collapse of FTX and dealing with a series of institutional bankruptcies related to it. The panic in the crypto market has caused some people to turn their attention back to Hong Kong.
In addition to this policy encouragement, the market has also begun to discuss "Chinese concept coins" and listed a series of related projects, investment institutions, etc. For example, the growth of projects like Conflux has also attracted attention. A few years ago, Chinese concept coins were a topic that project parties avoided talking about, and many project parties were even trying to distance themselves from China. The emergence of this phenomenon is regrettable.
The Situation of China's Concept Coin Market
Generally speaking, Chinese concept projects can be divided into two stages, with 1994 as the watershed. Before 1994, China could issue projects, such as the early Antminer and Quantum projects. In fact, their technical capabilities were quite good at the time. Due to the popularity of 1CO, many projects suddenly emerged in China, resulting in increasingly poor quality. At that time, domestic project owners had not really harvested the profits before 1994, which led to the subsequent withdrawal of coins. In other words, in theory, most of the domestic projects before 1994 were actually good, with good concepts, good returns, and good technology.
The arrival of 94 has caused domestic projects to withdraw their coins. Although they cannot operate domestically, this has also brought more problems. For example, without supervision, some junk projects have begun to appear. At the same time, some project packaging techniques have also emerged, such as the dissolution of domestic teams, project parties moving abroad, changing registered addresses to foreign countries, and even some finding foreign agents and immigrating to become Chinese to escape supervision.
The lack of supervision has also led to a mixed bag of projects. Some junk projects have started to run away with the harvest, or those that were previously prepared to be harvested but did not have time to harvest have continued to use different methods to harvest. Participants have also suffered heavy losses and shed tears of regret. Domestic projects have encountered the most serious crisis of trust in history, and the Chinese label has made many project parties stay away.
After experiencing the bull market in 2020-2021, the above-mentioned problems have not been alleviated. We have seen fewer domestic projects. In fact, they may appear in another form. There are very few high-quality projects because the trust crisis of most people has not been resolved. The few successful projects have also transformed into international projects. After all, the decentralization of blockchain itself has nothing to do with any country. Going out and allowing contributors from more nationalities to participate has become a new consensus.
A brief analysis of China's blockchain industry
Project Products
We divide the blockchain industry into two categories: coin-based and non-coin-based. Currently, the blockchain that has been compliantly registered in China is the non-coin-based blockchain. For example, Alibaba, Tencent, JD.com, Baidu, etc. are all involved in the blockchain industry and have their own blockchain products and platforms. Of course, if we look beyond the appearance, the main features of these blockchain platforms are also quite obvious:
1. Centralized control, belonging to the category of alliance chain, TPS and other performance are very high
2. Hyperledger technology is widely used
3. Mainly promote platform services, and more focus on integration with existing businesses
4. Some of them have already been implemented in corresponding scenarios, such as taxation, government affairs, copyright, and collections.
The currency aspect is relatively complicated. On the one hand, the mainland does not allow the issuance of virtual currency, so there is currently a blank in this area. Most domestic public chain projects are located in Hong Kong, Macao and Taiwan, and some have already gone overseas for operation and have nothing to do with the country. Hong Kong is the first choice for many domestic teams. Most of the well-known Chinese projects are in Hong Kong, and some are in Singapore and other places. The mining industry is basically in North America and Central Asia where electricity prices are cheap.
Technical Talent
There is no doubt that China has a large number of blockchain technical talents. In fact, before 1994, some projects were already very well-known abroad. Affected by policies, domestic projects could not develop, but this did not prevent the growth of the technical talent team. At present, many mainstream projects have more or less the shadow of Chinese technicians, which is mainly due to the relatively low salary costs and solid technology in China.
If we divide the salaries of technical talents into three categories, most of the high-end ones are in Europe and the United States (all the capable ones have gone there, and there are also many Chinese), of course they also have very high salaries, and the mid-range ones are relatively more popular in terms of cost performance, which is mainly due to the low salary and overtime culture in China. In a project, both high-end talents are needed to guide the direction of the project and mid-range talents are needed to produce actual results. Therefore, we see that many foreign projects also have the shadow of Chinese technical talents, but they can only remain unknown. A heartbreaking fact is that the salary required for foreign technical talents of the same ability is often several times that of corresponding Chinese talents. Therefore, for CEOs and CFOs, they are also very happy to hire Chinese people to engage in development, rather than letting Chinese people serve as the general manager. Some Chinese projects will also choose foreigners to make up the numbers, but the actual work is still done by Chinese people.
As we said before, issuing coins is not allowed in China, but it does not say that China is not allowed to undertake the technical part of foreign projects. Therefore, some project parties will adopt outsourcing to assign part of the development tasks to domestic companies. Chinese people only do technical development and are not involved in coin-related parts, so business development is relatively easy. The Doudouya company that developed DODO and whose employees jumped to their deaths is an obvious case. This also reflects the possibility of this model from the side.
mechanism
There are not many institutions involved in blockchain industry investment in the mainland. Most of those related to currency have moved to Hong Kong for registration. Domestic institutions including Sequoia China, Baidu, Tencent, etc. have all invested in the blockchain industry. The relevant legal risk level here is relatively low, because the investment in many projects is not necessarily currency investment, and many are equity investments. Therefore, they are not subject to regulatory suppression like currency speculation. Investing in equity is the main direction. However, even so, domestic investment in the blockchain industry is still relatively conservative. More institutions are in Hong Kong and Macao, especially those registered in Hong Kong are more active.
In general, the blockchain industry in the mainland is in a suppressed state, because many of them involve currency, which is relatively sensitive. Therefore, most of them either go overseas or go to Hong Kong for development. There are also many risks for Chinese concept coins to survive in this environment. In the last bull market, in fact, many well-known projects were not known to everyone about the Chinese background of the team. There is no discrimination here, but more of a helplessness.
Is it a sudden explosion or is there another plan?
The policy opening in Hong Kong is the most direct reason for the popularity of Chinese concept coins. In addition, there are sudden changes in the foreign environment. After the collapse of luna/UST, the collapse of FTX and the chain reaction have caused many people abroad to question their foreign projects, just like the doubts of Chinese people about domestic projects in 2017. This is itself a manifestation of the collapse of trust. The tightening of supervision is expected. When institutions collapse in succession, they must take action. From this perspective, we believe that it is a very wise choice for 94 domestic companies to take action on altcoins in advance.
If 94 had not taken action in advance, the country might have faced the same situation as the current situation abroad. Many people thought that the one-size-fits-all approach was inappropriate. In fact, when we look back a few years later, we will find that we have avoided the occurrence of larger-scale risks. At least the inland areas did not have any problems in this regard.
Similarly, of course, Hong Kong's previous retreat in the crypto industry (good policies did not keep up and it was more conservative) led to many projects going to Singapore. Many people thought that Singapore would surpass Hong Kong to become the crypto capital of Asia, but they did not expect the reversal to come so quickly. It is true that Singapore is the focus of the bull market and Hong Kong is the focus of the bear market. In the bull market, the big guys are all thinking about how to lock in profits and find a buyer. Singapore has become the injured one. Even Singapore's state-owned funds cannot get rid of losses, let alone others. In the bear market, funds are really used to buy high-quality projects. Therefore, from this perspective, Hong Kong's opening up of crypto investment is actually equivalent to buying the bottom abroad. I have to say that this move is indeed high.
Summarize
The popularity of Chinese concept coins is an inevitable development, and it is also a reflection of the sudden changes in the foreign environment. Of course, policy guidance is also crucial. Doing the right thing at the right time and place is also an important factor in the current overall situation and the attention paid to domestic concept coins.
