“出海” means “to travel abroad” in Chinese. The term has become a slang term for Chinese tech businesses establishing their operations outside of the country. Going abroad is typically a source of pride for Chinese entrepreneurs since it showcases the supremacy of Chinese technology ( think of how ByteDance turned Douyin into TikTok and changed how social media is done globally).
However, it sends shivers down the spines of the Chinese crypto community. That’s because Plan B is something that everyone in this sector, not just miners, must think about.
The impact of the crackdown on the rest of the crypto community, including entrepreneurs, developers, and investors, is explored in this week’s Da Bing. What is everyone’s backup plan?
Getting Out of China’s Market The current crackdown disproportionately affected two categories of people: miners and centralized exchanges. Miners, understandably, are already working on their Plan B, with the majority either shutting down or fleeing the country.
However, centralized exchange providers like Huobi and OKEx are in even worse shape. The days of the government relying on its expertise to develop China’s blockchain strategy are long gone. Both exchanges have now been instructed to stop all leveraged trading and have harsher OTC trading restrictions imposed on them.
Indeed, the government has shut down one of the nonprofit blockchain research institutions financed by Star Xu, the founder of OKEx, and Leon Li, the creator of Huobi, because it is “organized criminality that destroys social order.”
The transactions are sheep in the government’s wolf’s mouth. They are unable to flee since they have nowhere to hide or go. They missed the opportunity after 2017 because both founders are now subject to Chinese government border controls.
The rest of the crypto community, on the other hand, is doing OK. No one has been “invited for a cup of tea,” and no policy has been issued ordering crypto media outlets to cease operations.
Despite this, any pure crypto project now has to quit the Chinese market, with its millions of users and valuable liquidity.
In China, crypto has entered the underground age. But it’s not as bad as it appears.
Cryptography evolves into an underground movement. When the government barred the youth from listening to these foreign, corrupt melodies, China had a booming underground rock and heavy metal music scene in the 1980s and 1990s. As a result, the melodies, rhythms, and rhymes were forced to seek refuge in grandma’s cellars, where they thrived.
One DeFi entrepreneur told me, “Crypto will be a black market in China, just like the underground rock-n-roll music scene.” “Crypto investment, particularly in primary markets [equity and pre-token sales] and crypto development, which are low-key operations, may persist. Everything else, however, will be kept out of China.”
In reality, many crypto entrepreneurs have told me that they want to stay in China for the next 1-3 years but keep quiet to work on growing foreign audiences for their own companies. This is a significant strategic shift. The Chinese version of the app must be discontinued in favor of one aimed at a global audience. As a result, business development and sales will be impacted.
The only way to survive is to have worldwide operations. And, being able to decentralize fast becomes crucial—which plays to crypto’s inherent strength.
Developers are enthusiastic about the future. The current prohibition has had the least impact on developers. The crackdown, according to Xiang Yao, founder of Primitive Lane, a crypto research institute based in Shanghai with members all throughout China, has solely harmed the economic side of crypto in China. Much of the country’s R&D effort is still going strong.
Yao even sees the crackdown as a necessary cure to the market’s chaos and greed. “Research is similar to sowing seeds. The study fruits will merely be a product of human greed and wealth if the crypto industry remains unregulated and selfish. He predicted that they would be premature.
Primitive Lane, for example, is a recent example of a grassroots community-oriented organization where members can submit study topics like the Ethereum difficulty bomb, the rise and fall of GasToken, MEV on Layer 2, and so on. Grants, resources, and research skills will be provided by the community to these scholars. Monthly offline activities will be held by the community.
Primitive Lane has recently gotten a lot of support, including a large payment from an unnamed funder that would “keep the group sustainable,” according to Yao.
However, one thing that Yao should consider is that if crypto is completely underground, its potential to recruit new members will be severely limited. Granted, cyberpunks and Chinese libertarians will continue to be captivated by space, but without government assistance, millions of Chinese youths are unlikely to become Solidity developers.
The smaller the number of new developers in the business, the more vulnerable China’s crypto-economy becomes.
It’s necessary to separate the political words from the conduct in order to comprehend China. The government has a habit of shouting slogans for years, but we rarely see commensurate deeds. We’ve heard the slogans and seen some action in the instance of the current crackdown. The question remains, however: when does the action come to a halt?
Maybe it doesn’t matter. Flexibility is a distinguishing feature of China’s Communist Party. It might ban cryptocurrency one day and then encourage it the next. Working in this sector means living on the edge almost anywhere in the world. At some point, we may all require a Plan B.
The term “YYDS” is starting to appear in Chinese crypto terminology. That’s the Chinese abbreviation for (yngyun de shén), which means “Forever God.” It’s a flattering term for a legendary crypto trader, OG, reputable degen, or simply a well-informed influencer.