China's crypto crackdown will help clean up market: NEO chief

April 16, 2018 15:14
Da Hong-fei, founder of NEO blockchain, delivers a speech during the TOKEN2049 conference in Hong Kong in March. Photo: Handout

Originally known as Antshares, NEO is China's first open-source blockchain, and has been dubbed as "China’s Ethereum." Despite China banning crypto trading and initial coin offering (ICO) projects since last September, NEO's crypto token has enjoyed an incredible 48,900 times price rise in 2017.

At the time of writing, NEO is currently the No.9 cryptocurrency by total market capitalization, trading at US$67.8 per token, with a total market cap of US$4.4 billion.

In an interview with the Hong Kong Economic Journal, founder Da Hong-fei said NEO, which many see as the frontrunner when it comes to Ethereum alternatives, does provide similar capabilities as a platform for running smart contracts and so-called ‘dApps’ or decentralized applications. But the main difference between NEO and Ethereum is NEO’s emphasis on staying regulatory compliant, he said.

NEO defines itself as a blockchain project that utilizes blockchain technology and digital identity to digitize assets, to automate the management of digital assets using smart contracts, and to realize a "smart economy" with a distributed network.

"One of the biggest difference [between NEO and Ethereum] is NEO's focus on using blockchain and other new technologies to serve the real economy,” said Da, adding that it makes the blockchain platform “less anonymous than other platforms” while providing the benefit to easily cooperate with real-sector companies and governments.

For a platform to be regulatory compliant, one important feature of NEO is its digital identity, as it caters to identity information of individuals, organizations, and other entities that exist digitally, providing a way to link physical and digital representations of assets. By doing so, judicial action from regulators can be taken against the users on NEO blockchain network.

Apart from NEO, Da also co-founded a company called OnChain, which aims to develop public and private blockchain for businesses and government, in particular, those based in China.

OnChain has become a strategic partner of Microsoft China on multiple projects, working with Microsoft China in digitizing and securing signatures via blockchain technology. It also received investment from Chinese conglomerate Fosun Group, to integrate OnChain across their businesses. Moreover, OnChain partners with Chinese regional government to develop public services and digital identity.

Having managed to garner high popularity and a strong fanbase, NEO appears to be successfully weathering the Chinese clampdown on digital currency.

Da said in the interview that the crackdown has been effectively eradicating the scams and frauds plaguing the market, while leaving NEO relatively unscathed. 

"Those devoted in developing the blockchain technology are still here to stay,” he says.

Asked about when the government should lift the ban, Da said it is hard to forecast the regulator’s action. "The point is how [ICO] would bring an impact to the market and the society; if it is a good one, I believe no country should reject that.”

The cryptocurrency market is extremely volatile, both on the upside and downside. Since a major correction occurred in February, most of the cryptocurrencies in the global market have all moved in a similar pattern. Bitcoin, the largest cryptocurrency by market cap, has recorded a nearly 60 percent plunge from its record high in December. As for NEO, it has slumped by about 65 percent from its high in January.

Da sees the major correction as a normal and inevitable event considering the meteoric surge in cryptocurrency prices over the past year.

"It reminds me of the similar correction in 2013, when bitcoin had soared to hit 8,000 yuan before seeing a correction to its low at around 900 yuan.” He added that “even with the massive collapse, everyone [in the sector] still continued to pay a lot of attention to cryptocurrency technology.”

As the crypto space has been commonly likened to the dotcom bubble, Da admitted that “the crypto bubble, if that exists, should have been popped, as we see lots of crypto tokens in the market have dropped to below their listing price.”

“Many of these projects or businesses are using blockchain technology merely because they are interested in the ICO model as a new way of raising funds,” said Da. "I believe many blockchain projects that have emerged recently would vanish, or become inactive in three years.”

“Yet, many people, like mainstream enterprises and financial institutions, start to pay attention to and study in blockchain due to the cryptocurrencies’ price surge,” he said, adding that it helps "foster the ongoing development of the technology, which is similar to what happened in the dotcom bubble, leading to the rise of tech giants like Amazon and Google.”

As a crypto veteran devoted to China, Da hopes that once virtual currency prices stabilize, which he expects to happen sometime this year, “the market, as well as the community, shifts the focus from speculation to technology development and innovation.”

This article appeared in the Hong Kong Economic Journal on April 16

Translation by Ben Ng with additional reporting

[Chinese version 中文版]

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Hong Kong Economic Journal