On Wednesday, January 24th, the biggest rumor was surrounding OceanEx’s decision to allow Chinese citizens to both access the site and submit KYC documents. This comes after the platform had blocked Chinese IP addresses for more than 2 months since launch.

Photo Credit: Twitter User @joejd414

Since then, I tested it, and was in fact able to submit KYC documents using a Chinese passport – without a VPN. This opens up the exchange to a very large percentage of the world’s population, and one that that has traditionally not shied away from speculative investments.

A lot of people were confused by what this means for OceanEx and digital currencies in general. Many people mistakenly believe that China has been frozen out of the market after national policy banned ICOs and exchanges in the spring of 2018. Those who have followed Chinese policy, or lived in the country, know that things are never that simple. To begin, I must understate that China, as a region, never truly left the market.

Digital payments and eCommerce are staggeringly overwhelming in China. Alipay and WeChat have all but replaced cash for many individuals, and QR codes are everywhere – convenience stores, taxis, street vendors, and subway turnstiles. This has supported an ever-present OTC market, where citizens can quickly exchange RMB for digital currency with other consumers (c2c). Huobi, OKEx, OTCBTC, and Gate all allow such transactions, enabling users to purchase BTC or ETH in minutes. The process is quite simple – at times even easier than in western countries.

Huobi’s OTC platform

So where are we now?

One of the biggest problems with trying to interpret ‘rule of law’ in China is that there is very little consistency. For exchanges, they can only guess what is allowed, and how the policy will change in the future. Larger exchanges, such as Huobi, are definitely working under the government’s watchful eye to create infrastructure that fits into the legislation. Clearly, Huobi’s decision to move operations to Hainan last month reflect that. Hainan, an island south of the mainland, is the newest special economic free-trade zone, that is tipped to be China’s answer to Silicon Valley. It has a focus on internet companies, and government development overseers wouldn’t be letting just anyone move in – clearly Huobi is operating legally at this stage. If you follow the press releases of major cryptocurrency exchanges – notably Binance, you’ll see they have a distinct lack of communications regarding Chinese development. To a westerner, that would come off as a sign that talks are on hold. For China, it merely means that the companies aren’t discussing it publicly. Don’t be fooled – CZ hasn’t just abandoned the world’s largest region to go hunt for new startups in Malta and Uganda.

For OceanEx, the fact that they have set up shop in the capital city of Beijing shows they are committed to focusing on compliance. Their latest decision to allow Chinese users probably isn’t part of some breakthrough in policy, rather it’s more likely the realization that Chinese policy is heading in a new direction – one that is supportive of local platforms and avoiding widespread bans. The Cyberspace Administration of China has made that fairly evident, with their new regulations going into effect next month. Overall, this is good for the entire industry, but especially good for projects that have been playing by the rules and sticking close to home.

Global Trade Wars and Huawei

For those that haven’t been paying attention, China has a major issue to deal with. Their technological pride and joy – Huawei, has been dealing with scandals stretching from North America to Australia and New Zealand, as well as Oxford University. China realizes they are deep in a technology war that will shape the future of the internet and global commerce – with stakes so high that losing is unacceptable. For those looking for more info, I recommend reading this article on “the split-ernet.” Author Michael Spencer talks about how China is churning out superior internet services, buoyed by the national centralization that can support them. This allows products like WeChat and Taobao to gain unfathomable levels of market penetration.

For exchanges, this means that we are not headed in a direction where local platforms are banned. China can’t afford to allow its users to flock to western platforms. There simply isn’t a scenario where China doesn’t support their homegrown tech projects on a global scale – just ask a Canadian what lengths they will be willing to go.

For these reasons, I’m particularly optimistic about what a “tech race” might mean for local platforms such as OceanEx, Huobi, and OKEx. They stuck around in Beijing throughout the hard times, and will undoubtedly be rewarded through favorable policy in the future. Will it happen soon? Hard to say – but I wouldn’t be shocked to see the framework for exchange licenses being built this year. Once that happens, the floodgates of RMB investments will be thrown wide open.

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On Friday, VeChain announced their partnership with two technology service providers in China. Unfortunately, the news was only announced in Chinese, and sent the internet scurrying for their translation apps. 

Shanghai Houlianhui Information Technology is working on a digital certification service that can be used by government agencies, schools, as well as many other professional industries like finance and law. 

Zhongshang Beidou is a Beijing-based supply chain management company that provides a number of services, including blockchain-as-a-service. They partnered with VeChain to provide a food traceability program, similar to the Bright Code announcement by DNV GL.

Both of these companies are relatively new, having been established in 2015. Neither announcement will set the world on fire, but they show a consistent trend that I’ve been discussing for awhile now. VeChain continues to fragment, providing the core technology for existing service companies to build upon. The benefits of this strategy are: 

• Enterprises bring unique experience for specialized situations
• Enterprises have access to existing client bases with established trust and reputation
• Enterprises are more likely to promote their own solutions to clients
• Clients, especially in China, are more likely to use a solution built by a recognized and trusted partner
• Business Development is separate from the VeChain digital currency, providing legal compliance
• VeChain doesn’t need to hire as many in-house developers
• VeChain’s development team can focus on developing core features rather than third-party dApps

The personal experience and established client bases companies like this bring to VeChain forms a valuable launchpad towards becoming a globally-recognized enterprise blockchain. Two weeks ago we saw similar integration with BIOS Middle East (Dubai), who are also creating their own BaaS solution for their customers. As this trend continues, VeChain on-chain transactions will continue to increase as third-party web-based service providers expand the functionality of the blockchain.

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For months, many people have been baffled by a ranked list of cryptocurrencies, with clickbait titles insinuating that the country is endorsing EOS as the top blockchain.

These titles make for great blog posts and tweets, but leave many people scratching their heads.

Why is a country with an active ban on ICOs and cryptocurrency exchanges endorsing one of the biggest ICO-funded coins in the industry?

The answer is pretty simple: It’s not. The ministry that oversees the Internet and other technologies is MIIT, or the Ministry of Industry and Information Technology (中华人民共和国工业和信息化部). The people behind the list are SaiDiWang, or CCIDNet, which while technically is an affiliate of MIIT, are overseeing the rankings as a private project.

Contacting CCIDNET

I contacted CCIDNet over the phone, and while they were very polite and knowledgeable, admitted to doing the project on their own as part of their internet consulting services. The title of their rankings translates roughly as “SaiDi Global Blockchain Technology Rankings” and includes an explanation that they are published by a SaiDi Blockchain Agency in Qingdao, China. I suspect that most of the confusion comes from overzealous non-Chinese speakers who are unable to distinguish between a third-party consultancy and an official government ministry.

I then asked why large marketcap projects like TRX and VeChain were unlisted, to which they replied that TRX would be ranked starting in January, and that VeChain had opted out of the rankings.

To me, this was a red flag. Why would a third-party ranking system seek permission of open-source projects before listing them? The speaker on the phone implied that VeChain was unconfident about where they would end up on the list, and didn’t want to hurt their brand image by a low score. While I may be biased, I do think that VeChain would score fairly high based on tech, applicability, and creativity, leaving this excuse as an implausible one.

Which leaves us with the possibility that VeChain felt the rankings were a waste of time, flawed, or refused to offer payment in exchange for a listing.

Appearing on Social Media

Searching around social media landed a few more bits of information.

The top two posts on a search titled “Does anyone understand SaiDi Consulting?” were basically people complaining about everything from the company having a “low” skill-level to annoying management. The conclusion seemed to be that working there would be useful for someone seeking to switch their household registration “hukou” (read more about that here) but provided few other professional benefits.

Conclusion

SaiDi Consulting makes these rankings as a service for their customers, but doesn’t pretend the rankings are endorsed by a government ministry. That three of Dan Larimer’s projects (EOS, Bitshares, Steemit) are in the top-ten should be enough evidence that the rankings are heavily biased. Since SaiDi Consulting reaches out to blockchains before including them on the list, I would be highly suspicious of soliciting bribes. SaiDi Consulting is free to make rankings as a service for their customers, but it is no more credible than if I made one myself.

Author’s Note: This is not meant to be financial advice. For more of my analysis on China’s blockchain regulation, click here.

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