Binance CEO Changping Zhao can always be counted on to find a silver lining in any policy move with even a slight chance of boosting crypto, so it is no surprise that he reacted positively to the release of this white paper. CP found the release of the document “noteworthy” because it sort of coincides with new cryptocurrency regulations in Hong Kong that went into effect June 1.
We respectfully disagree – and remain circumspect about the whole idea of Hong Kong as a testing bed for crypto in mainland China. While we do think that some regulators on the mainland are willing to let Hong Kong experiment with crypto, that does not mean that they will allow the same thing on the mainland. Consider the difference between the mainland’s and Hong Kong’s capital markets, or the territory’s broader free financial flows and the mainland’s insulated banking system. It is entirely possible for a dynamic crypto ecosystem to emerge in Hong Kong of which very little, if any, carries over to the mainland.
Now back to the contents of the white paper. Entitled “Web3 Innovation and Development White Paper (2023), defines Web3 as providing a 3D online space that merges virtual reality and reality in an immersive experience that could enhance communication between humans and improve the efficiency of economic endeavors. It refers to Web3 as “an inevitable trend for future internet industry development.” The white paper’s contents do not mention cryptocurrency, but rather artificial intelligence, XR interactive terminals, and content production tools.
Yang Hongfu, director of the Zhongguancun Chaoyang Park management committee, recently said that the city’s Chaoyang district plans to allocate at least RMB 100 million (US$14 million) annually until 2025. We see that financial pledge as a signal that China’s Silicon Valley takes Web3 seriously, but again, not as a conduit for cryptocurrency.
We would not be surprised if China works to develop Web3 the same way it did the first two iterations of the internet; that is, in a more controlled and self-contained manner than internationally. While Beijing undoubtedly knows that an isolated Web3 ecosystem will limit opportunities for Chinese startups in the space, it will be difficult to integrate a Chinese version of Web3 devoid of cryptocurrency with a version that uses decentralized virtual currencies as a building block.
Beijing seems keener on using the metaverse as a key building block for its version of Web3. To that end, the municipal government of Zhengzhou, the capital of China’s Henan Province, recently issued proposals to support metaverse companies, including setting up an RMB 10 billion fund dedicated to the industry.