China declares success over cryptocurrency – Is this the end of the crackdown?

The People's Bank of China issued a report announcing that steps to combat digital asset fraud have been accomplished. Will NFTs and GameFi thrive in the regulatory aftermath?

This weekly compilation of news from Mainland China, Taiwan, and Hong Kong seeks to compile the industry's most relevant news, including key projects, regulatory changes, and business blockchain integrations.

The regulators have triumphed

Following a stormy summer of crackdowns, Chinese regulators have declared triumph in eliminating illegal cryptocurrency trading activity in the country. This discovery was made in the forecast part of the People's Bank of China's "China Financial Stability Report 2021," which was released on September 3.

The section titled Major Achievements in the Battle to Prevent and Defuse Major Financial Risks emphasises that regulatory work in internet asset management, equity-based crowdfunding, internet insurance, virtual currency trading, online foreign exchange trading, and other areas has been largely completed.

While this may appear to be a huge negative for the business, most projects and companies in China are now breathing a sigh of relief. The end of the crackdown means that businesses will have a little more breathing room to operate without fear of legal repercussions.

China's public blockchain business, or what's left of it, will no longer have to operate in the shadows. There is also anticipation that future editions of Shanghai Man's columns would focus more on development and innovation and less on crackdowns.

The mining industry bore the brunt of the regulators' wrath, while exchanges and brokers are clearly turning away from China in the long run. Players such as ByBit and Amber have already stated that they do not allow Chinese users, which might be a trend in the future if the hazards of doing business in China do not outweigh the profits. Bigger firms like Binance and FTX will have far bigger decisions to make, but for the time being, they are not shying away from onboarding and servicing Chinese users.

From Sichuan to San Antonio

After winding down operations in China, many significant mining companies began looking for greener pastures elsewhere. Since Texas governor Greg Abbot announced that Texas would become a crypto leader, numerous bitcoin mining businesses have relocated to the Lone Star state in pursuit of regulatory stability.

Bitmain, the world's largest mining manufacturer, has a location in Rockdale, Texas. Rockdale has a population of less than 6,000 people, a far cry from the 21 million people that call Beijing home. Bitmain is also deploying $62 million in hardware to the state of Georgia.

BIT Mining, based in Shenzhen, is also investing $26 million to develop a data centre in Texas. It joins BlockCap, Riot Blockchain, and other mining companies already present in the area. All of these enterprises will be encouraged by the news that state legislators in Texas have signed Texas House Bills 4474 and 1576, which legalise cryptocurrency under commercial laws.

Texas is now the fourth US state to recognise the legal status of digital assets, providing investors and businesses with clarity that is severely lacking in China. Various governmental organisations in China have flipped-flopped on the legal status of cryptocurrencies just this summer. This is generating a decline in confidence in the Chinese market's long-term viability, which will drive even more enterprises offshore.

One country, two regulators

According to a Hong Kong Securities and Futures Commission executive, the increasing spate of fraud cases indicates to the need for tougher regulation. The special administrative region has a far laxer regulation towards digital assets, allowing exchanges such as FTX, Bitfinex, and other Fintech firms to start up operations.

Hong Kong has long been regarded as a link between multinationals and the thriving Chinese market, but in recent years, this dynamic has begun to shift. With tougher regulations and greater uncertainty in Hong Kong, Singapore is seeing much more growth in the bitcoin field, with a number of high-profile industry executives relocating there.

Trends that are not fungible

The overall trend of NFTs has not gone unnoticed by the Chinese market. OKExChain launched its OKExNFT marketplace on September 2, joining the likes of Binance and FTX in launching similar platforms.

While it may not have the most imaginative name staff, it does host a number of Loot-lookalike NFTs known as Root, which are aiming at capturing the NFT and GameFi market. China's gaming and trading markets have historically been quite active, making this a logical move. It remains to be seen whether OKExChain can replicate the success of other exchange sidechains.

Steph Curry's choice to join FTX as an ambassador drew varied reactions, with some pointing out that the NBA star, known in China for his lighthearted nature, has evolved into a business master.

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