In 2017, China dominated cryptocurrency headlines – but to many observers, it’s now all quiet on the eastern front. But don’t let the diminished focus fool you – Chinese blockchain projects continue to innovate and build; and some are moving ever-closer to major global adoption.
On Thursday, September 6th, NEO organized a press event entitled “Symposium: Blockchain in China” which involved seven Chinese and Southeast Asian blockchain projects – NEO, Bytom, PlatON, Ontology, Vechain, Conflux, and TomoChain.
NEO Global Development (NGD)’s head of marketing, Gao Yuan, moderated the event. Discussions focused primarily on the Asian blockchain industry through 2020; driving mass adoption in China; and the Chinese regulatory environment.
Last February, NEO’s leadership outlined the roadmap to NEO3 at the second DevCon in Seattle. Since then, many of their goals have been achieved. NEO has successfully expanded the NGD Seattle team, updated NEO’s consensus algorithm, partnered with second layer solution providers, and launched a digital identity solution.
The project leaders discussed collaborative efforts towards building Web3 solutions, or what NEO founder Da Hongfei referred to as the next-generation internet (NGI) initiative, launched by the European Commission.
The future of blockchain in China
The symposium began with a discussion of stablecoins and their potential impact on the future of Chinese exchanges. Most participants at the round table believed fiat-backed stablecoin assets could be viewed similarly to traditional currencies, which regulators may see as a replacement for conventional fiat.
Notably, the traditional industry seeks stable assets, because Bitcoin’s price volatility reduces institutional interest in using cryptocurrency for lending or settling trades. When regulators can view fiat-backed stablecoins as currency alternatives, cryptocurrency may become acceptable assets for management.
But TomoChain’s CBDO, Kyn Chaturvedi, challenges the need for banks to accept crypto-backed assets.
As centralized exchanges such as KuCoin and Binance offer “soft staking,” Chaturvedi pointed out, these platforms have become bank-like entities that manage retail investor’s assets. With staking benefits, retail investors may choose to park assets in an exchange, as opposed to a bank.
Further, the outlook through 2020 is “all about enterprise,” according to Chaturvedi. He expects decentralized finance applications to begin entering the Vietnamese and Southeast Asian markets.
Da Advocates For Blockchain Trade Organization
NEO’s Da added that interoperability (or cross-chain atomic swaps) will have a more significant role moving forward.
With the digitization of assets, he pointed out, retail investors can use physical assets (i.e., mortgaging a home) for collateral. Digitizing assets also allows for user transaction history to act as a form of credit history, which may increase access to assets or settlement characteristics for users.
Further, Da believes the conversation could begin around a type of world trade organization (WTO) between blockchain-based companies. A WTO might help to create a broader overlap across chains, much like the overlap between economies of varying countries. He went on to say that a free-trade zone among public blockchains could create a better division of labor.
For example, European and U.S.-based projects seem ever more likely to register in Switzerland, and Asian projects are often primarily interested in registering in Singapore. Something like a blockchain-WTO is necessary to consider activities allowed in specific jurisdictions.
Looking forward, Jun Li, founder of Ontology, believes changes in the coming year will meld developing countries with the internet. This could allow smaller to medium-sized platforms the opportunity to increase data points, use cases, and credibility.
Driving mass adoption in China
Before mass commercialization of blockchain can occur, current technologies and product offerings must reach a level of maturation, which reduces friction for onboarding new users. Reducing friction for end-users is a prerequisite.
Developers and companies should make it simple for the less technologically savvy portions of the population to purchase cryptocurrencies and use decentralized applications. Further, tokens need to be integrated into current traditional platforms to replace current offerings.
Kevin Fang, founder of VeChain, is integrating the company’s blockchain technology into the existing technology of the company’s enterprise partners. As a service, VeChain outsources provider solutions that are customized for specific industry-based pain points.
For example, VeChain offers traceability to Walmart China’s supply chain for food safety. To hammer home the point of interoperability, Fang said, “enterprise partners don’t care which chain they’ll use, or if it’s a public or private chain, they just care that a traceability solution will work.”
John Wang, head of NEO Ecosystem Growth department, believes there are two areas of focus for driving mass adoption: complete ecosystems and interoperability.
First, he said, complete ecosystems are required to grow user bases and integrate blockchains. The integrity of a public blockchain is critical for the success of a project as is its ability to offer support for ecosystem partners.
Second, a single blockchain cannot serve real enterprises, just as systems, applications, and products (SAP) solutions can not address all of an industries problems. In addition to software, he said, implementation teams are also necessary to coordinate and assist enterprise partners in meeting their needs.
Ultimately, blockchain-based entities require further regulation, so they understand the limitations within which they can operate and where they stand. Without defined regulations, existing companies can get shut down when new regulations come down the pipeline.
With a clearly defined regulatory framework, blockchain can more easily integrate with current financial products and traditional industries.
China’s regulatory environment
The final discussion of the symposium focused on China’s current and potential future regulatory environment.
Yuanjie Zhang, CFA of Conflux, highlighted that “blockchain and regulation aren’t incompatible.” Activities on blockchain architecture require regulation, he said, whether it’s activity through the exchanges or private wallets.
For example, U.S. projects require digital currency exchanges to submit know your customer (KYC) data. If a user gains returns from their assets through an exchange and doesn’t file taxes, authorities will soon be able to to catch tax evaders.
“If the Chinese government wants to tighten regulation,” he said, “then it just needs to look at the regulations around the world.”
Chaturvedi noted that, “In the West, we think China is strict, but there is clarity on what regulations actually are. In the US, there’s the SEC, the CFTC, FinCEN… each look at cryptocurrencies in different ways. As a result, regulation is very confusing.”
“Permissionless doesn’t mean you’re not allowed to be non-compliant,” said Ontology’s Li, noting that ICOs are banned in China because of illegal fundraising strategies. Li went on to say, “Fraud is illegal everywhere; China isn’t an exception.”
“Chinese regulation is among the strictest in the world,” added Da Hongfei. “China knows very well what can be done and what can’t be done, which is different from many regulators.” He went on to highlight that Chinese blockchain projects spend more on legal costs than blockchain companies in other countries.
With only three regulators in China that usually issue joint guidelines, Chinese-based projects like NEO better understand what can and can’t be done.
Interoperability Demonstrates Blockchain Advances
NEO hosted the symposium to highlight the importance in the industry to build relationships across projects and establish interoperability protocols in the future.
Perhaps price isn’t the best indicator to measure blockchain projects’ successes and their potential moving forward.
Rather, it may be more telling to pay attention to coordination efforts between blockchain projects that have remained in the industry through the 2018 bear market.
If multiple blockchains are to succeed in the future, it is interoperability that will likely be paramount to their success – and that of the broader industry.
This article has been amended to correct a mispelling of Kyn Chaturvedi’s last name.