Conflux, known in Chinese as Shutu, is a Layer-1 public chain project founded by members of Tsinghua University's 'Yao Class', and the mainnet was launched in October 2020.
By the end of 2018, a seed round of financing raised $35 million, with investors including Sequoia China, Huobi Capital, Baidu, etc. In 2023, it received a $10 million strategic investment from DWF Labs for technology expansion and user growth.
It is worth mentioning that the project also received $5 million in research funding from the Shanghai municipal government, marking the first investment by the Chinese government in an unlicensed blockchain domestically. This is also the origin of what many people are talking about regarding the meeting in Shanghai.
One of the direct catalysts for CFX's recent surge is Conflux's official announcement of a strategic cooperation with AnchorX and Dongxin Peace to jointly promote the issuance of offshore RMB stablecoins and carry out cross-border settlements and real asset tokenization in countries along the 'Belt and Road' initiative.
Here, let's explain what AnchorX and Dongxin Peace are.
In simple terms, Dongxin Peace is the issuer of the RMB stablecoin, a Hong Kong fintech company that has obtained relevant financial licenses and is preparing to issue a stablecoin pegged to the offshore RMB.
Dongxin Peace is a Chinese smart card and security solution provider, playing a technical support role in this cooperation.
I believe the reason for this rise is speculation on expectations, leading to a surge in sentiment and consequently an increase in the market.
The aforementioned strategic cooperation releases positive signals, leading the market to anticipate capital inflows into CFX.
On one hand, the pilot of offshore RMB stablecoins signifies that real funds may potentially enter the Conflux ecosystem through on-chain stablecoins in the future, creating a rigid demand for CFX (for transaction fees and staking). Investors often position themselves in advance to await potential capital inflows.
Additionally, the 'Belt and Road' blockchain infrastructure project led by Conflux has been included in the national key research and development plan, and official support has increased investor confidence.
Although Conflux is positioned as a compliant public chain, the pilot of cross-border stablecoins and crypto assets inevitably touches on sensitive regulatory areas in various countries.
On one hand, mainland China's attitude towards cryptocurrency trading remains strict. Although this pilot of RMB stablecoins is positioned offshore (offshore RMB), if the scale expands, regulators may tighten policies, such as strengthening scrutiny of cross-border capital flows or requiring higher compliance standards.
Moreover, the regulatory environment in related 'Belt and Road' countries varies, and some countries have not yet clarified the legal status of digital currencies. If local regulatory agencies have doubts about the stablecoins issued by AnchorX, it may delay or even halt the pilot process.
Secondly, offshore RMB stablecoins involve sensitive issues of monetary sovereignty and foreign exchange control; the stance of the People's Bank of China and the State Administration of Foreign Exchange is crucial. If the authorities are concerned that stablecoins may bypass capital controls and impact the digital RMB (e-CNY), they may also restrict its development.
Therefore, the uncertainty of policies remains a potential bearish factor that obstructs the realization of favorable outcomes.
From a technical and business perspective, offshore RMB stablecoins also face challenges for large-scale application.
First, stablecoins need to have sufficient offshore RMB reserves to support them. How AnchorX obtains and stores these reserves, as well as how it interfaces with the banking system, is a complex issue. If reserve management is not transparent or lacks liquidity, stablecoins will struggle to gain user trust.
Secondly, cross-border payments are not only a technical issue but also involve a series of financial infrastructures such as exchange rates, clearing, and anti-money laundering. A unified blockchain payment clearing network has not yet been established between different countries. Even if Conflux's technology matures, cross-chain and cross-border settlement still require the cooperation of financial institutions in various countries. Without official clearing channels, stablecoin payments may be limited to small-scale pilot projects, making it difficult to generate the anticipated large-scale capital flows in the short term.
Furthermore, bringing RWA assets on-chain also poses legal and execution challenges: the legal validity of asset ownership transfer and digital rights certification varies across different jurisdictions. If assets like real estate and bonds are to be brought on-chain, each project must obtain local regulatory approval separately, resulting in lengthy cycles.
These landing difficulties may lead to the market's anticipated positives not being realized in a timely manner. If the progress does not meet expectations, investor sentiment may reverse, leading to a price pullback.
In summary, CFX may face pullback pressure. Everyone still needs to closely monitor news dynamics. Control positions and do not blindly chase high prices.
I also recalled a similar coin from the previous cycle, FIL (Filecoin), which experienced a surge during the 2021 crypto bull market. Its price once broke the historical high of around $237 and has now fallen below $10 (a cumulative drop of about 98%).
This trend reflects obvious bubble characteristics: early large-scale investments from miners and retail investors, followed by a depletion of funds leading to a cliff-like decline.
During the rise of Filecoin that year, mainstream Chinese official media did not directly endorse the FIL token. Although official entities like the Ministry of Industry and Information Technology supported 'distributed storage' technology and held IPFS/Filecoin-related meetings, these policies focused on the development of basic technologies (IPFS) and did not explicitly support the FIL token. This was compounded by media hype that triggered the rise.
CFX's current momentum is still in a speculative stage, similar to the early market conditions of FIL, both showing short-term stimuli from favorable policies/media and the possible adjustments that may follow.
Wishing everyone that the chips in hand are not the last ones, and manage risks well!
