Crypto founders see hope in Beijing promoting Web3

White paper regarded as positive sign of support as it coincides with new virtual asset rules in HK

Cryptocurrency entrepreneurs are talking up the central government’s support for Web3, tying a recent Beijing white paper to Hong Kong’s efforts to become a crypto hub as they face increasing regulatory scrutiny in other parts of the world.

Binance chief executive Zhao Changpeng, Huobi adviser Justin Su and Animoca Brands co-founder and chairman Yat Siu all praised the report, titled “Beijing Internet 3.0: Innovation and Development White Paper”, suggesting the moves in Beijing and Hong Kong together signalled China’s greater support for Web3.

But the paper makes no mention of cryptocurrencies, which are banned on the mainland.

The Binance chief, known in the industry as “CZ”, on Sunday posted on Twitter photos of the paper published by the Beijing municipal government.

“Interesting timing on this Web 3.0 white paper from the Beijing government tech committee,” he tweeted, noting that new virtual asset regulations in Hong Kong take effect on June 1. The tweet had drawn more than 11,700 likes and 2.6 million views by yesterday.

The Beijing Municipal Science and Technology Commission published the paper on Sunday at an industry forum. At more than 100 pages, it takes a broad view of the next-generation internet that encompasses everything from blockchain to the metaverse and artificial intelligence.

“Internet 3.0 is a three-dimensional space that blends the virtual with reality, with highly immersive and interactive experiences,” the white paper reads.

The definition covers elements from both the metaverse and Web3, it notes.

Each concept has generated hype around the idea that it will be the future of the internet. The metaverse is meant to consist of interoperable 3D virtual spaces where people can interact online.

Web3 is the idea of a decentralised web based on blockchain and similar technologies. However, Web3 is often used to refer to cryptoassets like digital currencies and non-fungible tokens (NFTs).

For the government, blockchain is just one of the key technologies for “internet 3.0”, along with artificial intelligence, semiconductors and brain-computer interfaces. Cryptocurrencies are noticeably absent from the report, as Beijing clarified in September 2021 that trading of such assets in the country was illegal, even as promotes the industrial use and development of blockchain.

But cryptocurrency entrepreneurs with ties to China, who had left the country during previous crackdowns, are celebrating the white paper as a positive sign.

Some in the industry have been pinning their hopes on regulatory change in Hong Kong being able to help thaw a longterm crypto winter, possibly igniting a new bull run, and that the city will become a base for Chinese crypto activity.

Huobi’s Sun, who also founded the blockchain platform Tron, retweeted Zhao’s post over the weekend, saying China’s “commitment” to Web3 “reflects a significant step towards recognising the transformative potential of decentralised systems and blockchain-based solutions”.

Yat Siu, whose blockchain unicorn Animoca also operates the metaverse platform The Sandbox and sells virtual plots of land, tweeted that China released the paper “with the aim to … promote the #web3 industry after Hong Kong had already started promoting it 6 months ago!”

As the cryptocurrency industry continues to face intensifying regulatory scrutiny overseas, both Zhao and Sun have found themselves in legal hot water in the United States. In March, the Securities and Exchange Commission (SEC) sued Sun for selling unregistered securities.

The same month, the Commodity Futures Trading Commission named Binance and Zhao as defendants in a suit alleging the company was operating an illegal exchange with a “sham” compliance programme.

Over the past few years, the SEC has sued multiple companies and individuals over the selling of cryptoassets that it considered to be securities. Crypto entrepreneurs have decried the lack of regulatory clarity in markets like the US, which has no specific legislation for such assets.

This is why some see the moves in Hong Kong as promising, with hopes it signals China is softening its stance towards crypto. Animoca’s Siu said he believed the measures in Beijing and Hong Kong were connected.

“It signals what Hong Kong has always been, a financial centre that acts as the financial intermediary and gateway in [and] out of China, and digital assets will work the same way,” Siu said via email.

“Hong Kong, we believe, will experience a talent and innovation boom embraced by the potential of Web3 and has a chance to lead in this category not just regionally, but globally.”

Last week, Zhao called coverage of Hong Kong’s new cryptocurrency regime by state broadcaster CCTV “a big deal” that could lead to a bull run. But by the next day, CCTV had deleted the report.

Interesting timing on this Web 3.0 white paper from the Beijing government tech committee

ZHAO CHANGPENG, BINANCE CHIEF