Research by the China Institute of Communications | Chinese local governments drive the booming development of encryption technology

The China Academy of Information and Communications Technology (CAICT) released the 2023 Blockchain White Paper yesterday, which discusses the current development status of China's Web3 ecosystem, led by local governments and leading enterprises, exploring how decentralized technologies can improve domestic institutional efficiency.

Excerpt source: China Academy of Information and Communications Technology, please refer to the original document for any doubts.

Current Global Blockchain Industry Status

Blockchain Industry Startup Market

Due to various factors such as macroeconomic conditions, the growth rate of global blockchain enterprises has significantly slowed down, with China and the United States leading in the number of crypto companies.

As of December 2023, there were a total of 10,291 blockchain companies globally, with the majority concentrated in the United States and China, with 2,802 and 2,697 companies respectively, accounting for 27% and 26% of the total.

Blockchain Industry Capital Market

In 2023, due to tightening regulations in multiple countries, the total funding for global blockchain companies in the first three quarters was only 979 deals, totaling $6.54 billion, a decrease of 32% and 77% compared to the same period in 2022.

Research | Infrastructure Attracts Attention, Cryptocurrency Industry 2023 Financing Summary Report

However, in the third quarter of 2023, the United States accounted for 50.0% of the global blockchain enterprise funding, far exceeding other countries such as the United Kingdom at 10.3%, Singapore at 4.8%, and China at 4.7%.

As of October 2023, there were 131 blockchain unicorn companies globally. The top five companies by valuation were:

• Binance: $45 billion
• Upbit: $17 billion
• Ripple: $15 billion
• Blockchain.com: $14 billion
• OpenSea: $13 billion

The United States had the highest number of blockchain unicorn companies, totaling 71, significantly ahead of other countries.

Current State of China's Domestic Blockchain Industry

Distribution of China's Blockchain Industry

China's blockchain enterprises are mainly concentrated in regions with high digital development, including Beijing, Guangdong, Shanghai, Zhejiang, Jiangsu, and other provinces and cities.

China's Blockchain Capital Market

As of the first three quarters of 2023, Chinese blockchain enterprises completed a total of 14 financings, with a disclosed total amount of $54 million. Some of the blockchain companies that received funding include Boundary Wisdom, Language Trend Technology, Lingxiao Collection, and Dinglian Numerical Science.

According to Forbes' 2023 Global Top 50 Blockchain list, China had six companies listed, including Ant Group, Baidu, Construction Bank, Industrial and Commercial Bank, Tencent, and WeBank.

China's Blockchain Industry Applications Starting from Overseas

Major domestic companies have established new entities overseas and held product launches and partner events to promote Web3-related fields:

• China Mobile Hong Kong, China Merchants Shipping, Huawei, and other companies jointly established the Hong Kong Web3 Association.
• Alibaba Cloud, Avalanche, and MUA DAO launched the Cloudverse solution for cloud universe.
• Huawei Cloud officially announced the Web3 node service NES.
• Ant Group launched the Ant Chain Web3 new brand Zan.
• Tencent Cloud launched blockchain RPC services for developers and enterprises.

Local Governments Leading Industry Development

Local Government Promoting Infrastructure

Following the 2021 policy "Guiding Opinions on Accelerating the Application and Development of Blockchain Technology," several provincial governments have accelerated the exploration and trial of blockchain infrastructure for data sharing, resource management, and public services.

To date, more than ten cities nationwide have completed and put into use blockchain infrastructure, with representative cases including:

• "Shuxin Chain" led by Sichuan Province: China's first provincial-led blockchain, aiming to combine blockchain with applications such as medical care, agricultural products, and venture capital management.
• "Henan Chain" led by Henan Province: Applications include electronic licenses, financial services, judicial deposits, real estate transaction registration, agricultural product traceability, smart medical care, and other scenarios.
• "Shancheng Chain" led by Chongqing: Provides blockchain services to various departments in Chongqing, integrates Chongqing's public accumulation fund information sharing, supports the realization of "fingertip processing and second-tier account deposit" for public accumulation funds, and provides a strong information-based foundation for housing provident funds.
• "Zhijiang Chain" led by Hangzhou, Zhejiang Province: Combines blockchain with privacy computing technology to build a network on the city's big data platform to provide secure channels for data circulation.
• "Zhuquan Chain" led by Guiyang, Guizhou Province: Supports the deployment of blockchain-related businesses by various government departments at the provincial and municipal levels, promotes the deployment of leading enterprises, major projects, and key projects, and promotes pilot applications in urban governance, technology finance, people's livelihood services, industrial networks, and other areas.
• "Taihu Chain" led by Wuxi, Jiangsu Province: Integrates the technical operation of the city's administrative blockchain technology products and related applications into platform unified management.

Most of these blockchains have a node count ranging from 20 to 60, mainly designed in the form of consortium chains.

Local Government Promoting Industry Policies

In addition to blockchain infrastructure, many provincial governments in China have launched various related projects to promote industry development, including:

• Shanghai: Introducing the "Shanghai Metaverse Key Technology Research Action Plan (2023-2025)" to promote the development of underlying technologies, including Web3 network operating systems, digital identity management, decentralized storage, trusted computing chips, and other representative technologies.
• Chongqing: Introducing the "Meiyue Lake to Support the Next Generation Internet-Led Global Digital Technology Innovation Highlands Measures (Trial)" to explore the construction of a Web3 digital asset market, hold innovation competitions, and support the establishment of an open-source community to develop industrial ecology.
• Beijing: Introducing the "Beijing Digital Consumption Energy Level Improvement Work Plan" to improve digital content copyright protection mechanisms, promote the integration of rights in music, images, text works, and other content in the virtual and real worlds.
• Hainan: Introducing the "Hainan Province's Measures to Accelerate the Development of the Blockchain Industry" to support leading companies in exploring the construction of digital asset trading platforms and promote the trial operation of digital asset-related formats in Hainan.

China Has Not Abandoned the Cryptocurrency Industry

Despite past perceptions that China completely banned the circulation of cryptocurrencies domestically, officials are still promoting the development of cryptographic technologies, especially underlying network, decentralized identity, information sharing, and other technologies.

China's BSN will launch a decentralized identity (DID) project, becoming the largest-scale identity verification experiment.

China only prohibits speculation in cryptocurrencies, not the technology itself.

Setting aside the speculative nature of cryptocurrencies and NFTs, China has indeed found a suitable strategy for the development of its cryptocurrency industry—using decentralized technologies to enhance domestic industry efficiency, accelerating the practical adoption of decentralized technologies with the cooperation of leading companies and guidance from local governments, there is a real opportunity to witness a new wave of interesting social experiments and applications in China.