Introduction

China still maintains significant influence on the global cryptocurrency landscape despite strict regulations and official bans. The unique circumstances faced by the Chinese crypto market have fostered an active decentralized community with significant economic influence. This decentralized crypto ecosystem excels in adapting to new trends, solving problems, and rapidly developing innovative ideas, positioning it as a global trendsetter. Chinese market trends often influence developments in the rest of the world, making the adaptability and innovation of the Chinese crypto market a key force in shaping the industry's future.

However, currently there is a lack of comprehensive information about the Chinese Web3 market which makes it difficult to appreciate its proper value. Analyzing the Chinese crypto market provides valuable perspectives on emerging trends, potential regulatory changes, and innovative approaches that could impact the global crypto landscape. As the industry evolves, China's role, both official and unofficial, remains critical to its development.

This report examines these dynamics and offers perspectives for investors, developers, and industry participants navigating the cryptocurrency world. By understanding the unique characteristics of the Chinese crypto market, stakeholders can better anticipate global trends and developments.

Authors

Ryan Yoon (Tiger Research),
Zelda (Delta Labs),
Ruby Wang (Delta Labs, FourClub),
Fiona Fu (Founder of Fourclub)

0. Background

Source: National Development and Reform Commission

The report of China's 20th National Congress articulated a strategic vision for building a digital China. Blockchain has received considerable attention as a key technology underpinning the digital economy in mainland China. However, in the context of the global crypto-economy, China's conservative stance and strict regulations on cryptocurrencies have resulted in a compliant focus solely on the "technology" itself. As a result, companies involved in asset issuance and trading have gradually migrated to more crypto-friendly Chinese-speaking regions.

1. Regulation

In 2024, China maintained a stringent approach to cryptocurrency regulation, continuing to strictly oversee and restrict crypto-asset issuance and trading activities within its borders. This stance builds upon the 2021 Notice on Strengthening Supervision of Virtual Currency, jointly issued by ten central authorities including the People’s Bank of China (PBOC). These measures formally brought crypto exchanges, wallet services, and mining activities under regulatory purview, mandating stringent compliance requirements and entry criteria.

Source: China Government

Cumulative policy moves have effectively curtailed domestic operations of most crypto exchanges and wallet providers, compelling them to either cease services or relocate offshore. As a result, secondary market crypto trading within China has largely come to a halt. Even for compliant wallet and service providers, multiple policy constraints present significant challenges in offering comprehensive crypto asset management to users.

On the issuance front, initial coin offerings (ICOs) and their variants continue to be deemed illegal public financing activities. Crypto assets generated through mining are also subject to significant restrictions. Only a limited number of stablecoin-like tokens, issued through private placements or consortium blockchains, were permitted limited domestic circulation in 2024.

Overall, China's regulatory stance has created a very challenging environment for crypto activities within its borders. Authorities focus on risk mitigation and officially oppose organized cryptocurrency trading and unregulated fundraising. Despite these restrictions, a significant crypto market still exists in China. This suggests some level of unofficial acceptance, allowing the market to continue. This situation reflects a balance between strict regulation and allowing some modernization in blockchain and digital assets.

2. Exchanges

2.1. User Basis

Despite stringent restrictions on crypto trading, including local exchange and ICO bans, China remains a complex and influential player in the global cryptocurrency landscape. According to the Chainalysis Geography of Cryptocurrency Report, over 62 million people in China, representing 4.4% of the country's total population, currently own cryptocurrency, accounting for 6.8% of global cryptocurrency ownership.

Chinese investors continually find ways to access global platforms like Binance, OKX, and others. In August 2023, reports indicated that the Chinese crypto market recorded approximately $90 billion in trading volume on Binance, accounting for 20% of the global volume despite the bans. This figure overshadows Hong Kong's $64 billion in crypto trading volume during the same period. The trading volume dominance of Chinese users exceeds their proportion of global crypto owners, suggesting that Chinese traders possess higher trading power per customer than the global average.

2.2. Key Players

Exchanges have historically been a prominent venture for Chinese entrepreneurs, with new exchanges emerging in China during every market cycle. Leading exchanges by trading volume, such as Binance, Bybit, OKX, Kucoin, and Gate.io, originated in Greater China. However, in response to China's crypto ban, these exchanges have established offshore entities and relocated most of their staff overseas. Despite these relocations, the exchanges continue to maintain strong connections with Chinese users and rely heavily on the Chinese market.

3. Digital Collectible

In mainland China public trading of cryptocurrencies is prohibited and no token can function as a currency. Instead, NFTs are defined as a form of commodities, referred to as "Digital Collectibles" in the mainstream media. Influenced by the surging prices and cultural proliferation of Web3 NFTs, the Chinese market sought to capture the NFT craze while adhering to the trading ban on cryptocurrencies. This led to the emergence of digital collectibles with features such as compliance-oriented design, real-name registration, and collectible attributes.

These Chinese-specific digital collectibles operate differently from typical NFTs. They are issued on a permissioned blockchain and can only be traded for fiat currency. Transactions are primarily conducted through local third-party payment platforms.

Source: iresearch

While initially hyped a couple of years ago, the development of digital collectibles in China in 2024 shows a relatively slow and stagnant progress. In 2022, digital collectibles became a significant trend for traditional industries, with various brands issuing digital collectibles for marketing purposes. Traditional manufacturing industries, consumer sectors, cultural and creative industries, artists, and public figures all launched their own digital collectible projects.

Source: Forkast

Even China Central Television (CCTV) introduced a digital collectible for the Year of the Tiger during the 2022 Chinese New Year holiday. In 2022 and 2023, the number of newly registered digital collectible issuance and trading platforms surged to around 2,300.

However, there is currently little information available on the operations and business prospects of these platforms. The issued digital collectibles have yet to form a new category of collectibles with a stable circulation market, akin to sports cards. The main reason for this stagnation is the continuous tightening of regulatory policies on the issuance and trading of digital collectibles since the second half of 2022. Press releases promoting the issuance of digital collectibles have been restricted, and entities issuing digital assets are now required to comply with higher levels of regulatory standards. For instance, displaying digital collectibles in personal shops or registered stores on WeChat may result in account suspension or restrictions. Many leading digital collectibles trading platforms were required to rectify or suspend operations, which dampened market confidence.

Beyond mandatory rules from regulatory bodies, there are calls by the Deputy to the National People's Congress to introduce a “regulatory sandbox” mechanism. This would establish clear standards for market entry, operation, and exit processes. Additionally, there's a push to strengthen industry self-regulation and encourage NFT trading platforms to improve their compliance frameworks for the purpose of fostering good industry practices.

While there's strong support for such measures, the current focus is on establishing a legal foundation. There are still significant gaps in the laws and regulations governing this field. The development of a comprehensive set of unified substantive legal rules to clarify the legality of digital collectibles is under consideration. We did not observe a clear signal for change, nor have any additional prohibitions been introduced.

Looking ahead, assuming the national policies gradually become clear, China's digital collectibles market is expected to regain growth momentum. Digital collectibles represent one of the aspects of Web3 in China that shows promise of integration with the physical economy. However, the possibility of explosive growth in the short term remains relatively small. The industry is waiting for relevant authorities to clarify their regulatory approach and provide guiding opinions to support future development.

4. Gaming

China boasts one of the largest and most lucrative gaming markets globally, driven by increasing consumer spending power, the proliferation of mobile devices, and improved internet infrastructure. According to Statista, the number of gamers in China surpassed the number, reaching 674 million in the first half of 2024.

Source: Allcorrect Game content studio

In recent years, blockchain technology has started gaining traction in the Chinese gaming industry. Despite strict regulations around cryptocurrencies, Chinese gaming companies have been exploring blockchain use cases such as asset ownership, monetization models, increased transparency, and new gameplay mechanics.

However, only a few projects in mainland China have properly integrated existing Web2 game projects with crypto financing tools. Due to the limitations of the domestic market environment, Web3 games may face challenges in acquiring customers and operating domestically. In the long term, taking game products overseas may become a trend for Chinese Web3 game projects as they seek broader market opportunities and fewer regulatory constraints.

5. Infrastructure

5.1. Public Blockchain and Scalability

China has fostered several high-performance public blockchains, such as Tron, Conflux, VeChain, Quantum, Neo, Ontology, Nervos, PlatOn, and etc. Despite the delicate environment for public blockchain development in mainland China, these projects have accumulated a significant number of practitioners and developers. Building on the foundations and achievements of these historical projects, numerous new blockchain initiatives have emerged since .

China-based public chain solutions focus on technological originality, with innovative virtual machines other than Ethereum Virtual Machine (EVM) that show better performance. In the most recent market cycle, zk-oriented blockchains, Layer 2 solutions, and Bitcoin Layer 2 solutions, which emphasize privacy, scalability, and the BTC renaissance, have garnered significant attention from investors, developers, and users in China.

5.2. Blockchain-as-a-Service (BaaS)

China is focusing on leveraging blockchain technology to drive industrial transformation in terms of practical applications that enhance efficiency. The emphasis is on supporting technology innovation and scenario-based solutions, while taking a prudent approach to speculative cryptocurrency trading. As a result, numerous token-free blockchain projects aimed at practical application scenarios are emerging in mainland China, aligning with the nation's overarching emphasis on "prioritizing technology, industry, and avoiding hype."

Nearly all major Chinese internet companies, including Alibaba, Tencent, Jingdong, Baidu, and Huawei Cloud, are engaged in blockchain and have launched their own Blockchain-as-a-Service (BaaS) offerings. BaaS refers to the third-party deployment and management of a cloud-based network for companies building blockchain applications.

Traditional enterprises in China are also actively participating in blockchain research and application. Consortium blockchains are being used in financial services and areas like e-governance and judicial record-keeping. Private blockchains are being adopted by large enterprises to digitize internal processes and improve operational efficiency across manufacturing, retail, logistics, and more.

Source: Tencent

●      Alibaba Group: Leads the world in blockchain patent applications. Ant Group has launched blockchain services for cross-border trade, product traceability, and copyright protection, among others

●      Tencent: Launched the TBaaS (Tencent Blockchain as a Service) platform. WeBank uses blockchain for micro and small enterprise credit services

●      JD.com: Introduced the "Blockchain Anti-Counterfeiting Traceability Platform" to protect brands and consumers. Partnered with insurance companies to develop blockchain insurance solutions

5.3. Blockchain Service Network (BSN)

Source: BSN

In April 2020, the Blockchain Service Network (BSN) was launched—a global infrastructure network for deploying and running various blockchain applications across cloud services, portals, and underlying frameworks. BSN is led by the National Information Center, a think tank under the National Development and Reform Commission (NDRC), and is supported by other operators, including China Mobile and China UnionPay.

The Chinese government has issued policies and guidelines to support blockchain innovation and applications. Blockchain has been used for services such as electronic certificates, supply chain traceability for food safety, and anti-counterfeiting for pharmaceuticals.

In the financial sector, under the direction of the People's Bank of China, numerous blockchain pilot initiatives have been pursued. Blockchain applications are being used in supply chain finance, trade finance, cross-border payments, global settlements, transaction processing, bills & notes, inclusive finance, and digital currencies.

5.4. DePin

Source: DePinscan

Despite China's strict mining ban, China remains a key player in the DePin (Decentralized Physical Infrastructure Networks) industry. Although many miners and mining pools have relocated overseas, the domestic mining market is still seeking transformation into new areas. Networks based on Proof-of-Work (PoW) consensus still find fertile ground for development in China.

In the nearly $33 billion DePin market, approximately one-third of the hardware devices are running in China. According to DePinscan, thousands of active devices support leading DePin projects such as Helium IoT, Roam, Network3, and Filecoin. These projects illustrate China's continuing influence and adaptability within the global DePin landscape.

6. Venture Capital

In China, venture capital (VC) interest in the cryptocurrency market encompasses both traditional VCs and blockchain-focused VCs. Given that traditional institutions often face restrictions on cryptocurrency investments, they frequently establish specialized crypto investment arms to manage Web3 investments.

According to blockchainacademy and CB Insight, more than 40 traditional Chinese VCs are involved in blockchain projects, both with and without token investments, with an average fund size of 600 million RMB ($85 million). Institutions with national strategic significance, such as China Merchants Capital, tend to prefer blockchain technical localization projects (token-less blockchains). Most of these VCs are based in Beijing and Shanghai.

In addition, according to Crypto Fundraising Info, more than 30 crypto-native VCs have emerged in China and have also established offshore entities worldwide, with an average fund size of $100 million. Some of these institutions are spin-offs from parent companies involved in the cryptocurrency business, aiming to support the strategic development of their parent company's activities.

The status of VCs has been declining due to slow token unlock schedules and high valuations, which are not favored by institutional investors. Unless VCs can provide additional resources to projects, such as connections with exchanges, regional resources and communities, economic model design, or promotional capabilities, they are often viewed as a nuisance. In some cases, Key Opinion Leaders (KOLs) are surpassing VCs in influence and importance.

7. Developers

Source: github

China's blockchain technology ecosystem is rapidly developing, receiving significant attention and support from the government and businesses. With over 50 million open-source developers, China ranks third globally in terms of developer population.

Rust Annual Survey 2023 report, source: qq

Common programming languages used in blockchain development include Solidity, JavaScript, Python, Go, Rust, C++, and Move. Among these, Rust is particularly popular, with Chinese developers making up 6% of the global total, ranking third worldwide.

Several universities in China have established blockchain-related courses, cultivating talents for the blockchain sector. Numerous online education platforms also provide training courses on blockchain technology. Researchers from various colleges and universities have conducted in-depth research on expansion, privacy protection, and cross-chain technology. Key institutions include:

●      Tsinghua University: Pioneered blockchain technology courses globally. It hosts several research institutes investigating blockchain technology and has established related corporate partnerships

●      Peking University: Actively setting up blockchain-related courses and conducting in-depth research in related fields

●      Fudan University: Launched the "Blockchain Research Center" and cooperates with enterprises to jointly promote blockchain research and application

●      Zhejiang University: Established the "Zhejiang University Blockchain Research Center" in 2019, dedicated to blockchain technology research and talent cultivation

●      Sun Yat-sen University: Co-offers the "FinTech and Blockchain" course with the Chinese University of Hong Kong. The "Wanxiang Blockchain Week" in Shanghai is a notable event organized until 2023

Many universities and research institutions in China are engaged in blockchain technology research and development. They encourage the development of blockchain technology and products through various initiatives and partnerships. Various research institutions, incubators, and developer communities, often organized as DAOs, regularly hold hackathons to provide opportunities for new projects and ideas.

Currently, many universities in China have initiated courses related to blockchain, and some higher education institutions have established complete majors focusing on blockchain technology and its applications. These educational efforts are crucial in cultivating the next generation of blockchain developers and researchers in China.

8. Community

Local policies had played an important role in the establishment of blockchain clusters. Geographically, Beijing, Shanghai, Guangdong, and Zhejiang are the top four clusters of blockchain entrepreneurship.

●      Beijing: Beijing has placed significant emphasis on the supervision of the blockchain industry and serves as a hub for blockchain application sandboxes. For example, ChainMaker, backed by the Ministry of Industry and Information Technology of China, is a home-grown BaaS platform and consortium blockchain. Beijing's approach involves experimental blockchain application platforms spearheaded by government departments, implemented by large internet companies, and supported by numerous blockchain technology firms. These projects are significant in terms of policy orientation.

●      Shanghai & Hangzhou: Shanghai and Hangzhou have been leaders in blockchain acceptance, investment, and innovation. Notable blockchain firms such as Wanxiang Blockchain, Vechain, Onchain, Iris Network, Conflux, and Hyperchain were founded and supported by local governments. With rich engineering capabilities, these regions have also seen the emergence of investment institutions, exchanges, developer communities, KOLs, and various application projects. Although many projects have transitioned to distributed offices and established offshore institutions, Shanghai continues to play a crucial role in the Web3 ecosystem in mainland China.

●      Shenzhen: As China’s most innovative city, Shenzhen has consistently provided new trends and fostered the most active crypto trader community. The hot topics here are highly influential in cryptocurrency investment decisions across China. Additionally, Shenzhen is home to numerous studios specializing in conducting airdrops and engaging with "X-to-earn" projects on a large scale. These small workshops have formed a relatively mature industry within Shenzhen, dedicated to capitalizing on Web3 opportunities.

China has vibrant blockchain communities, composed of research and development personnel, app developers, research institutions, and investors. These communities engage in technical exchanges, application promotion, and cooperative relationship-building through a combination of online and offline activities. Currently, native Web3 Chinese communities are primarily active on platforms such as X(Twitter), Telegram, Discord, and GitHub, where Chinese influencers hold significant sway.

9. Media

Major cryptocurrency media outlets in China include Odaily, BlockBeats, Blockchain, and Foresight. ChainNews, a professional blockchain media platform that has ceased operations, previously played a significant role in bringing the latest trends and projects from the Western crypto world to the Chinese audience. Many influential figures in the crypto market emerged from ChainNews and continue to be active in the Chinese-speaking crypto market, effectively bridging the information gap between the Western and Eastern worlds.

In light of stringent regulatory measures, traditional professional institutional media in China are experiencing a decline. Consequently, Chinese-speaking Key Opinion Leaders (KOLs) have increasingly assumed the role of information dissemination and market influence in its place, becoming pivotal in shaping opinions and promoting new projects within the crypto community.

Disclaimer

This report has been prepared based on materials believed to be reliable. However, we do not expressly or impliedly warrant the accuracy, completeness, and suitability of the information. We disclaim any liability for any losses arising from the use of this report or its contents. The conclusions and recommendations in this report are based on information available at the time of preparation and are subject to change without notice. All projects, estimates, forecasts, objectives, opinions, and views expressed in this report are subject to change without notice and may differ from or be contrary to the opinions of others or other organizations.

This document is for informational purposes only and should not be considered legal, business, investment, or tax advice. Any references to securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or an offer to provide investment advisory services. This material is not directed at investors or potential investors.