China Banned Crypto One Year Ago. What's Changed?

That's been happening in one form or another since at least two thousand thirteen. Still, declaration prompted some pretty swift and significant changes. Among the biggest of these was the effect on bitcoin minors, who left China in droves. Many of them set up shopping places like Texas in the US.

To better understand the state of CRYPTO and China, we'll talk to Bloomberg reporters Uihi Yang The verall takeaway is China is becoming less relevant in the global cryptal community and David Pan the cryptal minors were definitely scrambling to get their mining machines out of China and we'll hear from Winston Ma. You know, China's crypto regulation is very compressive and essentially it prohibits cryptal mining, trading and transactions.

A venture capitalist at cloud tree ventures and the law professor at New York University Law School, David U, is always a pleasure to have you in the studio. Around this time last year, China decide that for real, actually officially, they were going to declare all forms of CRYPTO transactions to be illicit. Chinese regulators of Jumato have been talking tough for months, but on Friday they released a missive

that removed all doubt. It wasn't just a central bank, it was also nine regulatory agencies, and they specifically called out offshore exchanges, targeting Chinese users, banning them from hiring locally for roles that rang. Now, this was not the first time that China had started cracking down on crypto. It wasn't even the second time, but it did seem to be the most significant, not least because that band came with threats of like criminal penalties and other things

that didn't really sound fun at all. And so, David, I'd love to start with you on in the days that followed that declaration. What happened to the crypto minors and why were so many crypto minors in China in the first place? The crypto minors were definitely scrambling to get their mining machines out of China because some of these local governments by enforced the law. Essentially they were literally confiscating the the mining ricks from all of these

mining farms. So they were rushing to like ports like in Shinjin in south China. You know, they they were trying to find any possible way to resell their use the machines to other parts of the world, you know, like the US. Were even Central Asia, Eastern Europe and anywhere you can possibly think of, and were they selling the machines where? They're trying to get those machines to those places so they could use them again. Like what

was happening? I'm a minor in China. This declaration comes down. What do I do next? First, they have to unplock millions of mining machines. So that was the thing they had to do because the national gride in China, the regulators were able to monitor the electricity usage of the bitcoin mining farming, especially the large scales, large scale, big in mining farms, because there's really easy to spot them

on the grid. So they had to close down all of these farms first, otherwise they're going to be put into jail according to this new declaration. So they did that and then they started thinking about how they can transfer their mining operations from China to places like Texas, Russia, you know, all of these other places. U Really I'd love to get your perspective on what it meant for flows,

transaction volumes. You know, in addition to China having been a mining hub, they were arguably, for a while like the center of CRYPTO transactions in the corners of the markets that you cover. What were some of the effects of this band? So we know that historically there's a like you said, there's a large community of Chinese speaking crypto founders, investors, users and after the band in China and the correct in China and crypto volumes had tipped and China fell out of the top ten ranking of

global cryptal adoption index by train analysis. But then this year China analysis said that China has re entered to the top ten after placing as the number of thirteens in one and then this index showed that either the rules in China are not strictly enforced or there are just people who are still able to circumvent the rule using VP N and still participate in these cryptal services.

So I think when we talked to Chinese cryptal founders and investors, the overall takeaway is China is becoming less relevant in the global cryptal community, but the Chinese diaspora are not. They're still very active, a lot of them. There's still a lot of those folks who did move, they did leave the country. Are you hearing from any of them that they are media plans to, you know, to your points about whether the rules are being less and as the people are just getting, you know, clever?

Are they looking at setting up again in China, or is this do you feel like we're kind of at a stage where it's like, nope, we're here, this is the plan, this is how we're moving forward. So I think there are two groups of people making two totally different types of choices. Even though China crackdown on Crypto blockchain technology is still encouraged in China and there are efforts to find more use cases in blockchain in China

an F T as a digital collectible. It's also allowed, even though you can't really trade them on the secondary market, and therefore make it just fundamentally very different from the N ft in the rest of the world. But there are companies and even the state media, Shinhua, they issued an Ft. so there are efforts like that that are

still existing in China. So there's one group of people who would say that I want to stay in China and I want to bet on this parallel version of webs three in China that's kind of cut off from the rest of the world and then has its own rule. The block chains are usually permissioned. And then the second group will be the ones that we talked about that are moving out of China. They are still active in the global crypto community, but they're operating from Singapore, Dubai,

the US, Um Europe and other places. David, I want to go back to you. You know, a lot of your reporting has been around the fact that the folks running these companies got out of China, got their equipment out of China, or mostly got their equipments out of China and went to Lubbock or, you know, somewhere else in Texas or went to Kazakhstan and other places and ran into some unexpected challenges. What were some of those challenges? I think they are still facing a lot of challenges

as of now. One of the biggest the ones that will be the connections. Like you know, they don't have to connects to begin with. For example in China that didn't have to purchase power like you know, formal like agreement with the legal recourse. But like in Texas, they have to find brokers, they have to find suppliers and big established legacy energy companies to work with, and so they have to find those kind of partners locally. In

Texas they didn't have that kind of relationships. So that's a very big DISTU the meantage compared to the local miners, you know, such as riot and Marathon, all of this US based mining companies. You know, it strikes me, as we're having this conversation, that's so similar to what folks who tried to set up like manufacturing in Michigan or these other intersections where they were clearly like incumbent US

companies that had been doing things. And we're running into differences in language, differences in you know, even just like technology, the ways of doing things, are any of those kinds of elements also affecting the ability of Chinese miners to unseat the local incumbents, as it were, exactly. I think that is a really big problem. I think there was a documentary about like the Chinese factory was like a culture shock between the Chinese companies and the local employees.

That kind of scenario is exactly playing out amount the Chinese mining companies as well. For example, one big mining company CEO told me like when they went to like mid Western states like Ohio and when they set up the shop there and they realized that the American workers take way too many vacation days, whereas all of their Chinese colleagues were working around the clock and then try to, you know, finish the construction, tried to build out infrastructure.

So for them, I think it was definitely something they hadn't anticipated when they decided to move to the US, like in the middle of the US. I help but laugh at the idea that Americans have a lot of vacation days because, having moved here from London, where it's just like all vacation days all the time, I'm frankly stunned that, but you know, you learn. You learn something

new every single day. I feel like this is one of the more interesting, kind of useful and nuanced episodes that we've been able to have on the show so far. So thank you both for taking the time. I really appreciate it. Thank you. Thank you. You can find more of their reporting on the Bloomberg terminal, on Bloomberg Dot Com and on twitter. Uh is at UH underscore Yang. That's why U E Q I underscore y a n G and David is David underscore pan one. That's D

A v I D P A N underscore one. Up Next, more on the consequences of China's approach to Crypto with Winston Ma of cloud ree ventures. Winston, what a delight to have you on the podcast. Thanks very much for having me. Well, let's talk about two of your books, the one that you just published about blockchain and web three and an earlier one with the kind of the provocative title of the digital war, about the sort of the standoff, as it were, between the Chinese approach to

tech and the US approach to tech. How are you seeing this all play out in the universe of blockchain and web three. Great question to me. You know, the the evolution of the titles actually represents the evolution of China's tech development as well as the corresponding interaction with the US. You know that the book the Digital War was a sequel to my earlier book book China's mobile economy. And, as that suggested, right UH was a year of China's

mobile revolution. So the so the focus at that time was all about smart phone, mobile payment and the mobile e commerce. But from there, you know, China started to shift its focus from Internet development into hard technologies such as the Ai Blockchain, cloud computing, data centers, et CETERA. You know that that's why my book had the title the Digital War. How China's tech power shapes the future of AI, Blockchain and the cyberspace, now relating to the

blockchain web three topics. So you could say that blockchain web three is a new frontier of the U S

and the China Tech Competition. Now on your earlier book, the Digital War, you know one of the things you had in the cover was the logo for Tiktok, which is owned by bye dance and, other than being probably the most popular APP in the world is at the center of an escalating political battle, you know, with both Republican and Democrat officials in the United States sort of, you know, making loud noises around whether it's appropriate for

Tiktok to be owned by a Chinese company. There are no existing Chinese owned tech companies with a kind of a metaverse focus, or defi focus and n f t focus, that are as big in the US as Tiktok is. But do you see a world in which there is like sort of a crypto tiktok equivalent coming out of China? Not In the near term because, as this time you know, China's crypto regulation is very compressive and century. It prohibits

crypto mining, trading and transactions. So in other words, you know, in China there's a broad band Um crypto usage in the financial systems as well as in daily transactions. So therefore, the metaverse development in China is going through a very different path. Mostly, importantly, it is token list or you could say it cryptolists. What are the other elements of being crypto less in kind of the Chinese blockchain? The N F T is a good example of this cryptalist thing,

because n f t means nonfundable Tokens, right. So. So when when the N ft term includes the reference to token and the empty trading market sees exponential growth of volume, it is hard to imagine that n f t s can develop in China with to being associated with cryptocurrency

and its related regulations. That's why n teas are called digital collectible in China, to downplay the token aspect, the currency aspect, and also, as you mentioned, the regulations limit the second hand trading of an F T s. One of the things I'm always struck by is how in China and on Chinese APPS, in the Chinese APP ecosystem, those are often all things you can do in like one single APP, right like there's no need to have exactly it's you know, here in New York I might

have a door, dash, an Amazon, an Uber, whereas in if I'm in Beijing, I felt like one APP. I can do all of those things at the same time. Are you seeing a similar trend with, you know, metaverse, blockchain, digital collectibles being rolled into those big super apps? I totally think so. In I know it's a very natural development.

You could say it's like a super APP going next level, right because, as you said, in the early years of the mobile economy, Chinese companies were already focusing on building up super APPs, hoping that they can keep as many users in their ecosystem for as much time as possible. Right. So, when you look at Ali Baba's e commerce APP, essentially it's a combination of almost like one hundred small APPs. So the concept is, you know, you can do everything

in one APP. One kind of as a closing maybe super existential question, you know, in in places like the US, in Europe, one of the big propositions of blockchain is this resistance to government surveillance. How is that shaping how people are thinking about the utility of the blockchain in China? I think for for users, the data privacy is truly an important issue and it becomes even more urgent as we move into the metaverse. So for users they have to deal with the privacy issues with the big text

platforms as well as the digital infrastructure support suppliers. In China, because of the CRYPTO regulations, the government does not support public blood chains. So for N F T place, for gaming assets place right they have to be executed blood chains that are regulated by the government and now in the in the US, right the users can use the park brood chains, which tends to be less centralized, even though, you know, maybe blood chain of the bitcoin is the

only blood chain that's truly decentralized. However, we could say in general the public broad chains are more decentralized. But but still, you know, you have other data privacy issues as well. For example, you know, all the data are still held in three for major cloud cloud platforms like the Amazon, Google, Microsoft, of those guys, right. So, so you see, uh, it's a multi layer issues and I think for the individual users not only there for their

data privacy. You know, not only they're looking for public broaches but also a more comprehensive data privacy solutions relating to uh, data storage and management. Well, thank you so much for being on the podcast. I feel like I have certainly learned a lots and I hope our listeners have as well. Really appreciate you taking the time. Thank you very much. That was Winston Ma of cloud reventures.

On the next episode of Bloomberg Crypto we're going to talk about exchange traded funds and specifically Crypto et F S. There's some interesting and perhaps unhelpful stuff. That's hoping with their performance these days, and you'll hear more about that on the next episode. This is Bloomberg Crypto, a daily podcast from Bloomberg and I heart radio. For more shows from I heart radio, visit the I heart radio APP,

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