Despite China’s regulatory restrictions on cryptocurrencies, two entrepreneurs have shown they see a future in the country’s crypto markets.
While China has spent the past year implementing a series of prohibiting regulations that have made it almost impossible for the cryptocurrency industry to thrive within the country, Chinese crypto enthusiasts have not let government regulation prevent them from moving forward with crypto and Blockchain innovation.
Operating in China within the limits of the many restrictions related to crypto — from the ban of Initial Coin Offerings (ICOs) and domestic fiat-crypto exchanges in September 2017, to the additional January ban of “exchange-like services”, to the February ban of foreign exchanges — is reportedly not impossible.
However, in light of these restrictions, many of China’s top exchanges and other crypto businesses have been forced to relocate to places with more tolerant policies, generally still within Asia, such as Hong Kong, Japan, South Korea, and Singapore.
However, there are some Chinese innovators that see a future in the country’s crypto and Blockchain markets, regardless or in spite of current limitations for operating there. These entrepreneurs are doing their best to develop their crypto and Blockchain projects specifically with a Chinese audience in mind.
In late January 2018 at the Blockchain Connect conference held in San Francisco, Cointelegraph got the chance to talk to two such Chinese crypto entrepreneurs, Yi Lu, one of the founders of media company SV Insight –– the company hosting the conference –– and Xiahong Lin, founder of Blockchain prediction market platform Bodhi, one of the event’s sponsors.
SV Insight – bridging the gap between the US and China
Lu of SV Insight told Cointelegraph that the San Francisco conference was designed with the goal of uniting the Blockchain communities of the US and China. Lu, also Chief Growth Officer of SV Insight and lead of its parent company, Blockchain content discovery platform U Network, also talked about the US-China based media company. With half of its staff in the Bay Area, and half in Beijing, SV Insight’s dual location sets it up to form bonds between the two countries.
CT: From the position of being both an American and a Chinese media company, what was the overall goal in setting up the Blockchain Connect conference?
Lu: I think we are trying to bridge...so China and the US are two powerhouses in Blockchain, and at SV insights our mission is always bridging the gap between US and China. So we are bringing the top speakers from US and China, bringing in these communities to share their opinions. They can actually set a tone for the future of Blockchain.
CT: Brad Garlinghouse, the CEO of Ripple (XRP), also spoke at the conference. Ripple is known for its appeal to traditional financial institutions, due to its willingness to work within existing regulatory frameworks. How do you see Ripple working in the Chinese market?
Lu: I believe [Garlinghouse] spoke about how to promote Ripple in the Asian markets. I think that is one thing that is very interesting because you have an audience with a lot of users and token holders in China. But Ripple doesn’t have much business in China, they probably can’t promote [Ripple] to the Chinese market [due to regulations].
CT: Do you think a similar Blockchain conference could ever happen in China?
Lu: Yes, if we got a chance, and if the policy allowed it, we definitely could do that, maybe bring some top speakers to China. We are also open to partnering up with some team in China to set up another conference.
Bodhi – a prediction market for a Chinese audience
Bodhi is a decentralized prediction market built on the Qtum Blockchain, where users place bets using the platform’s native Bodhi Token (BOT). Prediction markets make it possible to invest in and trade the probability of the outcome of a certain event –– anything from elections, sales of a company, or sports results, to price fluctuations of commodities, or even changes in the weather. Some other examples of decentralized, Blockchain-based prediction market platforms include Canada-based Stox and US-based Augur, both of which use the Ethereum Blockchain.
Cointelegraph spoke with Lin, the founder of Bodhi, about his project, why he wants to work in China, and the future of crypto regulation globally.
CT: First off, can you tell us a little about what Bodhi is, and how the prediction market works?
Lin: Yes. It’s like betting. But when you say “betting”, then people start to ask, “are you gambling?” My answer is always “no,” because gambling is just one of the use cases of betting.
Actually, we as humans predict or bet on a lot of things. Like when you invest in something, you bet that some company is going to be successful in the future. Or when you fly and you purchase flight insurance, you bet that the flight may be delayed, that’s why you purchase the insurance. Or you can do stock trading or sometimes you do futures and options trading, then that means you are predicting the price will go beyond or go below a certain point. So all these use cases are not about gambling – it’s about your investment, it’s about trading, or it’s about insurance, right?
So you can create a lot of different kinds of usage, financial usage, more like sports-betting usage on top of Blockchain that will enable transparency and prevent black box manipulation.
Because Bodhi is a very cheap platform – you only pay a very small transaction fee – we enable a very low maintenance cost to let users rely on this trustworthy platform and to bet with each other. In summary, we are building this transparent and very cheap prediction market to serve a better protocol for the financial system. That’s what Bodhi is.
CT: Why is Bodhi built on the Qtum blockchain in particular?
Lin: There are a couple of reasons why Bodhi is built on Qtum. One is that we tried to build this prediction market for China. Essentially our product is a startup. To open this market, we needed to find a China-ecosystem-friendly Blockchain. Qtum has a partially Chinese team, which will help us to build it and cooperate together to make this product for China. That’s one thing.
The second thing is, I was a long term Blockchain participant. I’ve worked with Bitcoin since 2011, and in 2014 I started working with Ethereum and participated in the Ethereum crowdsale. I also was the first one to introduce these technologies to China. As a lot of people know, I am an Ethereum fan, but again, the reason why we built Bodhi on Qtum is just because we want to target China’s markets.
CT: Is it really about having Qtum team partly in China? Why does that matter?
Lin: I think this is a very important question because a lot of people question my choice, like, why [Qtum], since they think Ethereum is a global platform and it’s accessible from everywhere. I may argue it’s just like Google, right? Google is also like the king of internet, a global platform, but you can’t have only one single search engine for the whole world. Even Google itself comes with multiple languages and multiple URLs to serve different regions.
You may say, oh, Google is not serving the whole world because sometimes it’s blocked [as in China], but what about Reddit? Reddit is accessible to anyone, but again, language matters. It’s beautiful, the English language, but Chinese or other language users cannot use it directly.
That’s why for me, in the future Blockchain world, we’ll have multiple chains where different Blockchains will serve different functions.
Also, even if they are on the same chain serving the same function, you will have multiple Blockchains in different regions, different countries, because essentially language, business or culture are all about being local. It is local, it is not something universal. That’s why Qtum is almost the only choice for us right now.
I totally believe trend wise for us right now, when I look back in 2011 – it’s Bitcoin, and in 2014 – it’s Ethereum. Now what’s the next big thing?
I think trend wise, I believe all those great products will be flourishing in China, and that’s why we choose to target that direction.
Because for the past three years we learned about so many tokens and if you look at the list, none of them are from China. Most of them are built by a lot of Western world geniuses and employees, and that’s why I believe China is a great market, or a market with a great potential.
There will be huge growth, a promising future if you build something especially for China. So that’s a trend that I see. Actually, you can tell now by where we are in 2018 that China is a really huge market. It participates in a lot of projects and investments. I think this is just a beginning and it will have a lot of future.
CT: How do you see Bodhi developing within China’s strict regulatory atmosphere?
Lin: In terms of regulation, you may know that we used to be a very popular product in China, we’ve got a lot of fans, [partially] because I was a long-term crypto player. So I got great early supporters. We did a pre-ICO in August  quite successfully.
However, in September  there was China’s ICO ban. It made almost every project refund everything to users. We are a company based in San Francisco, and we have a coalition in Singapore – actually, we consulted with a lot of our lawyers. They said you are fine to keep those [pre-ICO] funds, because it was before the regulation and you are out of China.
But eventually I decided to refund everything because I don’t want to change my vision [of working in China].
Again, we are a startup, we are not doing a meaningless project to just simply open something and hope that somebody will use it. I want to be fully compliant with China’s regulations because we are targeting China, and China’s markets. So we decided to fully refund it.
But what’s next? I want to build this successfully and make it usable for China. That’s why we still need funds, right? That’s why we eventually came up with this idea about the Initial Exchange Offering (IEO) [selling a portion of a company’s tokens to investors via exchanges, instead of directly to investors via ICO]. Those early investors are free to trade those tokens and we keep it [some tokens].
You are still an ICO because you are doing the same thing, only you’re on an exchange. I really hope our project will be a really decentralized project and the token will be held by the whole community of users.
The difference between ICO and IEO is the timing. It’s before or after. We are after.
CT: Since you’ve been in the Chinese market for a long time, do you think the public there is more interested in making money with cryptocurrency by trading, or are people also investing in Blockchain technology?
Lin: Honestly, most crypto investors are now investing in crypto token projects. They don’t have strong interest in equity, traditional investment. That’s not true if you look in terms of the whole market in the whole world. They are still some other VCs investing in those Blockchain economies, but what I’m saying is that the majority of investors [in China] in this area right now are only participating in these token sales.
CT: What is your vision for the future of crypto regulation?
Lin: As an industry creator or industry contributor, I don’t want the [crypto] industry to become a bubble or just hype that eventually will fade away. I truly hope there will be more, for example, regulation or community-driven projects that can help prevent certain bad, crazy things from happening.
Somehow I’m kind of someone who believes that the crowdsale itself is not regulatable. It’s a smart contract; you put A-token in, B-token out. It’s really hard to check. But you could regulate the project owner, the people who built the project, or you can regulate the exchange to have enough KYC as well as prevent money laundering, for example. You can even regulate those people who participate in this area to provide KYC.
I think in general that [regulation] is a good thing. A lot of people think that regulation is a bad thing. For me, I think it’s necessary and it’s doable through the project owner, exchange, participants in this area. I truly believe with that the industry will grow in the right direction, instead of the way [now], where people believe you will get a fast investment return in a short time, which I think is not healthy.
These interviews were conducted in collaboration with Cointelegraph news editor, Olivia Capozzalo.