Unchained - From Blockchains To Mooncakes: Two Chinese Crypto Founders On The ICO And Bitcoin Exchanges Ban

Episode Date: September 19, 2017

Da Hongfei of NEO and Patrick Dai of Qtum tell us just how crazy China's ICO craze was getting, with mooncake companies, celebs and Ponzi schemers all jumping on the blockchain train. They also explain what the reaction was to the ICO and bitcoin exchanges ban, how they're refunding investors (if the investors want to be refunded -- a big if) and what the future of crypto is in China. Show notes: http://www.forbes.com/sites/laurashin/2017/09/19/from-blockchains-to-mooncakes-two-chinese-crypto-founders-on-the-ico-and-bitcoin-exchanges-ban/ Qtum: https://qtum.org/ NEO: https://neo.org/ Previous episodes mentioned in the podcast: Interview with Smith & Crown: https://www.forbes.com/sites/laurashin/2017/08/22/the-high-speed-world-of-icos-smith-and-crown-discuss-cryptoeconomics-and-the-future-of-tokens/ Interview with Bobby Lee: https://www.forbes.com/sites/laurashin/2017/03/21/bobby-lee-ceo-of-btcc-on-why-the-chinese-probably-arent-using-bitcoin-to-evade-capital-controls/ Learn more about your ad choices. Visit megaphone.fm/adchoices

Hi, everyone. Welcome to Unchained, the podcast where we hear from innovators, pioneers, and thought leaders in the world of blockchain and cryptocurrency. I'm your host, Laura Shin, a senior editor at Forbes covering all things crypto. If you've been enjoying this podcast, please help get the word out about the show. Share it on Facebook, Twitter, or on your secret slack and telegram channels. And if you have a chance, give the show a rating or review on iTunes or wherever you listen to your podcasts. And don't forget, you can always tweet at me. to let me know who you'd like to hear from in a future episode. My Twitter handle is Laura Shin. This week's episode is brought to you by OnRamp. Your branding and website are the first things your users will see, and in the current wild west of ICOs and blockchain startups, you need to stand out from the pack. OnRamp is a full service creative and design agency that will help amplify your brand with a perfect website, logo, collateral, or custom design project. Get big results in no time by visiting thinkonramp.com. The topic of today's episode is whatever is, is going on with tokens in China. My guest today both lead Chinese projects that have held ICOs. Welcome to Da Hong Fei, co-founder of Neo, formerly Antshares, and Patrick Dye, founder of Quantum and chairman of the Quantum Foundation. Hello, Laura. Hello.

So before we dive into the main topic, let's hear a little bit about your backgrounds. Hong Fei, let's start with you. How did you get into crypto and come to launch Neo? Okay. I came across Bitcoin in 2011, so that's almost the same with everybody else. And I started working full-time in the crypto industry in 2013. And then at that time, we have a club called Bit Angels Club. There are seven of us funded this club. After that, we spinoffed a project called N-shares. So that's basically a new is the rename of end shares. So we should, we spend off a project. started in 2014 to develop N-shares as a platform to issue digital assets. And then we add in the digital assets. We add in a smart contract to N-sharees. And this year, we rebranded it to the

new name, Neu. Okay. And Patrick, how did you get started in this space and come to launch Quantum? Yeah. Okay, hello everyone. Hi, Laura. Yeah, so my name is Patrick. I'm from the Quantum Foundation, a founder of a quantum project. I evolved into Bitcoin industry since 2012, when I would still prepare my master degree and a PhD degree in the CES, one of the best technology university in China. So I joined the industry since 2012, and then I dropped out my PhD in, when it's 2015, and I worked for Alibaba for six months. And then I left Alibaba and I started the quantum project at March of 2016. Yeah, so right now, the quantum made, we released a Maynette a few days ago. And the project is growing pretty very big right now.

Oh, congrats. Congrats. Although it's kind of a crazy time, I imagine for you. So let's talk a little bit about your ICOs. Hong Fei, when you were ancient. shares. You had two ICOs about a year ago and raised about $4 million. Is that correct? Yeah, yeah, correct. Yeah. And so I actually, I saw an interview that you did with, or that someone on your team did with Smith and Crown. And they actually brought the CEO, Brian Leo and the, the researcher,

Matt Schroot, they were on the podcast a little while back. But in the interview, the people on your team said that they felt that Western investors were more focused on the technology and they read the white papers closely, but that a lot of the Chinese were more like speculators, and they tended not to read the white papers as closely. So I just wanted to hear from you, overall, how would you characterize the Chinese people who have been investing in ICOs, and how have you seen that change over time? Yes, that statement is true. And the things is getting worse. You know, in the past few weeks, there are like 10 ICUs every week. A lot of people, they don't understand Bitcoin.

They don't know what Bitcoin is. They just came in and want to make quick money. And when the situation gets worse, the old ladies are investing their retirement savings. The government is stepping and stopped all the ICU in China. So they were participating in the ICOs themselves, like buying Ether and then sending Ether to a smart contract and receiving tokens? Actually, there are many platforms, ICU platforms in China. so they will help you to deal with the technical issues. So you don't need to be a tech savvy to do other things.

Oh, okay, okay. But the concern was that people who didn't know what they were doing were getting into this. Yes. Okay, and then Patrick, so Quantum raised $16 million in April. For you, what percentage of your investors do you think were Chinese versus West or versus non-Chinese? Yeah. So after the quantum ICO finished, we asked a few of our partners who helped us host the ICO. So from the data, we got like more than 20 countries, people participated in the quantum ICO.

So I think maybe 30 or 40% of people are from the Chinese investor or the Chinese participator. Yeah. So maybe, but the other percentage to come from U.S., not U.S., not U. US because we blocked all the US IP from Canada or from UK or from Europe or in Japan, Korea, and Russia. Yeah. Oh, wait, you blocked all of those countries? No, we blocked the US citizens. So because we made a clear announcement like if you are a U.S. American, you cannot participate our ICE.

Yeah. Oh, I see. But it was so the participants you were saying were from Canada and Europe and the U.S. UK and Russia and Korea and Japan? Yeah. Korea, Japan and China. Not to the U.S. market. Yeah.

Okay. And Hongfei, for the Neo, or back when you were AntShare, what percentage of your investors do you think were Chinese versus non-Chinese? The ICU one, the first ICU, most of them are Chinese investors. And for the ICU two, the one finished last year, half of the investments are coming from non-Chinese countries. Okay. So over time, how would you say that the atmosphere around ICOs was in China

kind of maybe a year or two ago versus now? How has it changed? I think a year ago, it's still very limited because the general public, they doesn't know what an ICU is. and people attending joining ICU, they need to have some technical background. But these days, everybody is talking to ICU because lots of them made money from ICU. So the general public are investing their money. And how do you think that change happened?

Like it started with, you were saying tech savvy people. Was it kind of like coders who were buying this initially? And then how did it spread? It doesn't necessarily to be coders. They just, those are people that are fascinated by the new technologies. They love to try new things. They love to support new things. But these days, most of them are speculators.

Okay. And there are many ICU projects. I think their goal is pointless. They're just here to make money. not trying to build something. Okay. And so what are some of the maybe inflection points or milestones where you feel like you saw that shift happen?

I think it starts in 2017. Yeah. I mean, the shift point or the change point happened like three months ago. Yeah. After some project being pumped so high, I think because the influence, of the maybe the Ethereum price, they jumped like 40 times higher since the March to May. Yeah, the price won't have like 40 times. So after people saw the price went up 40 times, then all the people, I think, not only in China,

all the people in the world, they become crazy. Yeah. I think the shift started slowly from 2017. Yeah. Yeah. I think the reason is people are making money. The organization or they started ICU are making money. The people invested in ICU are making money. It looks like everybody is gaining something. So it looks like it's a very good opportunity to make some profit. So everybody is very excited and they just made up a lot of ICU projects. And does this parallel anything, any other kind of bubble, or I don't know if bubble is really the word, but any behavior in China that you've seen in the past? I think it's the ICO bubble is not just a Chinese thing. It's a global, it's a global phenomenon. I had read about previous bubbles in China that involved things like tea and types of wood.

And even the stock market, that was a couple years ago. Like, is this kind of something that you feel like is maybe even culturally specific in a way? Like, I agree with you that there is a bubble, obviously, and I agree with you. It's the same in the U.S. where a lot of projects that shouldn't be trying to raise money are just because it's easy to do so. But I also feel like I've read that China in particular has some kind of culture on speculation that often leads to these types of bubbles. Yes, I think the Chinese, because in China there are really very limited investment opportunities. So people, you know, the Chinese, Chinese yuan is depreciation slowly. So people want to reserve their value, but they have very limited investment channels.

The money can only stay in China. You can invest in global market. So if they see some opportunity, they go ahead. So something else that I was wondering about is when you guys were constructing your ICOs, what were the laws in China that you had to be aware of to make sure that your offerings wouldn't land you in jail? Okay, for the question, which of the law area we needed to aware before we do the ICO? Yeah, like I'm assuming securities regulation is probably one. I don't know what else.

Oh, okay. So I think earlier in China, all the ICO area, it's just unclear and gray area because we do not have very clear regulations in that area. So for quantum, but we sort of maybe in the future, the Chinese government may have some regulations. So when we started the quantum project, we registered our foundation in Singapore. But we do have a small office in Shanghai. But, yeah, we have the gene.

I mean, originally we come from China. But then we were thinking, like from the very beginning, we know, okay, in the future, maybe the Chinese government may do some regulation. So we choose to register the quantum project legally in Singapore. And we have a very pretty global team from nine countries. Yeah. So, but in China, I think in the ICU area, there is a few departments they take in charge, like the central bank and the Chinese security committee, Chinese security regulatory committee, and maybe sometimes visa insurance like a department, too. They both can take in charge of the ICU area.

But as a main regulator should be the central bank and also the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the. Chinese security's regulatory committee. They are the main role to take in charge the ICO regulation. But until right now, we do not have very clear, like, law or any legal regulations, definition on the ICO. But just like the regulator, they saw the big risk right now. So they wanted the market just to become calm down, They want the market like

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They put that shit on everything. Breakfast available until 11 a.m. At participating Canadian restaurants for a limited time. Franks Red Hot is a registered trademark of the Frenchest Food Company LLC. Another thing I wanted to ask about is just how you guys first started hearing that, the people's Bank of China or PBOC might ban ICOs. Did you first hear rumors or like how did that all start for you? Yeah.

Okay, I will answer it first. Maybe then Hong Fei can answer this. Yeah, so, yeah, in truth, like, we will keep talking to the regulator even before the regulation came out. Yeah. So we know, like, it's kind of like if you live in China, you can feel like, some bubble is happening a few months, one month ago. Like, you know, everyone wants to start the ICO project.

Like Hongfei said, most of the ICA project is just meaningless. It's pointless. It's just some guy. I want to make money. So I think I do an ICO. They already forget the initial idea of the ICO. The initial idea of the ICO is, okay, I have a good idea. I want to build an open source project,

no business model, okay, I need the community to support me, to donate me some money. I think that's an initial idea since 2013 in the cryptocurrency industry. But this year, kind of something crazy happened. So I think the government realized like it's a big risk in China right now. Also the ICO platform, Hongfei just mentioned, like in China we have like maybe 65 platform, ICU platform, they help you to do. the investment to the ICO. It's kind of like the broker of the traditional stock market.

It's kind of like lower all the barrier for the average people. No matter you know Bitcoin, blockchain, whatnot, you can participate. You can invest. Yeah. So that's a big risk for the regulators. I think that's a reason why the government has made the regulation they announced like a few weeks ago. Yeah. And when you say that there are the.

ridiculous projects and it's just some random person who just decides to raise money with a cryptocurrency, but they don't have any real project or idea. What are some examples of some of the really crazy ICUs that you've seen or heard of recently? Yeah, I think, you know, initially the ICO is some way to, you can use your money to form some open source project, some talented developer, especially in the blockchain industry. But, you know, last few months, like, a lot of people come from the traditional business. Like, okay, because I saw a project, okay, they are a moon cake. You know, it's like a moon cake company.

Okay, I want to release the ICO. I want to sell my moon cake. Yeah. So it's kind of funny, you know, because, yeah, they want to do this kind of ICU to escape the regulations earlier. Yeah, so that's something I think the government, they realized oh, it's become crazy right now.

And we need to stop it. Yeah. That's just one of the examples. There's a lot of similar examples. What are some of the others? That is hilarious. What are some of the others? Yeah, there are some others like, you know,

there are some project. I mean, okay, blockchain is a very big innovation for the whole society, for the whole internet. But you cannot use blockchain to everywhere. It's impossible. Yeah, but, you know, since blockchain is a very hot topic right now,

all the people come from the traditional industry. No matter what they are doing, they want to build some connection with the relationship with the blockchain. So they are just selling the blockchain concept to the average people. Because blockchain is harder for people to understand. It's like the AI.

It's like the Internet of things. It's some big concept. So the people, they show the opportunity, like just, okay, I'm doing blockchain business okay, give me your money. It's something like this. Yeah. So, you know, you cannot make money from a concept.

You need to have real products. But then people realize, oh, I can sell blockchain concept and I can't get money. Then people change their initial idea, you know. A lot of projects, they overraised. I mean, some projects they raised $20 million in the ICAO. Some projects they raise $50 million. I mean, for a startup, why you need that much? money. Yeah, you don't even have a prototype. Yeah. That's some, that's still some real project.

Then became like some, like a very, very, very, like, how can I call that? It's a very normal project or even some fake project. They wanted to raise money because they say, oh, I have some connection with the blockchain. Then you can give me your money because the blockchain is a trained over the new world. Yes, you know, so something crazy. Yeah, people already forgot what they are doing. Yeah. Well, wait, but I just am so curious. So aside from mooncakes, are there any other really ridiculous traditional industries that said that they were going to have an ICO?

The mooncake one is so funny. I love it, but it's just wondering if there's another. Yeah, I think there's some, you know, some like maybe some superstar in China. They wanted to release some coin to sell their income in the next five year or ten year. Yeah, I can release a superstar coin. Oh, wow. That's actually, that is, I think, a security, at least in the U.S. it would be. Yeah, it's kind of securities. And, you know, there's like some traditional investors.

They joined the industry and they become the advisor. I can feel they're training like one month ago. A lot of angel investors, they jumped into the ICU industry. Because the reason is like, you know, they invested into a lot of, startup company, but it's very hard for always the startup, the invested to go to NASDAQ or go to the Chinese stock market, because only one percent of the startup, they have the chance to go to NASDAQ. So then that means, like, most of the engine investment will fail.

So they wanted to cash out. So how can they cash out? Okay, they ask the company, the invested to go to the ICO, then the NGO investors, they can cash out. Yeah, that's something happened like last. one month or two months yeah and I think because it's like an unsecured it's some like a private company and you cannot sell the shares easily in China but people seems they figure out oh I can do this in the ICU ways so I can sell my shares yeah but you know it's it's not it's not

permitted in China you cannot do this even today with the current regulation you cannot sell your shares easily in China I mean the private the company shares. Okay, yeah, this is, this is again not that different from what the perception of that behavior would be in the U.S. So now, out of curiosity, once the ban was put in place, what was the reaction to that? It sounds like you guys think it was pretty sensible. What was kind of like the broader reaction from the public?

I think most people think it's a good thing to. to stop all the all those scheme projects but they still feel it is too strict it just cute it may kill some good projects too and patrick yeah i think uh the public they have some reaction some uh some reaction for sure uh yeah i agree with honfe like but still you know there's some good project in china they think okay this i feel like um extract the regulation may kill some innovations in China in the blockchain area. Yeah. Okay.

So there's so much more to discuss, but we're going to take a break. We're going to come back and talk about scams. We're going to talk about refunding investors, the closing of the Bitcoin exchanges, and some rumors we're hearing. But first, I'd like to take a quick break to tell you about our fabulous sponsor, OnRamp. If you're starting up a new project or need some design or branding help on an existing one, OnRamp has you covered. OnRamp is a full-service creative agency that has helped numerous companies, including many in the crypto space, maximize their brand awareness, gain traction, and accelerate growth.

OnRamp has a passion for ramping up brands and boosting business results and can help with everything from website and logo design to social and content strategy. Focus on your core technology and leave the rest to OnRamp. To learn more and see how they've helped passionate entrepreneurs achieve their dreams, go to thinkonramp.com. Thanks, OnRamp, for being a supporter of this podcast. all of our listeners. So let's talk about refunding investors, because that is something that kind of really piqued my curiosity. You described a lot of kind of really interesting situations where I would imagine it would be pretty complex. Are you guys doing that? And if so, how do you even do that? Yeah, we offered actually my answer's ICU, the second one, in 2016.

is refundable before the main net is launched. So after we, from the period, after we finished the ICO, and before the main net launched, investors or participants can ask for a refund, a full refund. We received about 15, 15 requests and refunded 50 bitcoins at that time. And when the ICO bank came out a few weeks ago, we decided to extend that period. So until October 17th, the participants in both ICUs can still refund, ask for a refund, and they will get their Bitcoin back. But they have to send back the new token.

So that's the way we do, yeah. And so you did it, like you already had all their email addresses? Is that how you're doing these refunds? No, I'm asking them to send as an email at contact at nio.org, and we will give them a address, a new address. They send back the new and we will refund them with Bitcoin. Okay, and how can you be certain that they didn't just buy on a secondary market? Okay, so we will need them to sign the message. they have a private key.

For the for the ICO 1, they have an account. So they have a, we have their email address. For the ICU 2, the user will have a private key. Oh, I see. Okay, so they have to send it to you from that account. Yeah. Okay, but what if they've already sold their NEO? Then what happens?

Yeah. Actually, I don't care where you get the NEO. you, if you invest it like one Bitcoin and get, let me say, 1,000 new, if there is such record, you just send back 1,000 new. We won't check if it is the original new. Oh, I see. Yeah. Okay.

But so you had already planned that, but for all the ICOs that haven't planned that or hadn't, how are they doing the refunds? I think they just refunded some of the ICOs they finished their money raising fund raising period but they haven't issued their token so they just

refunded all the money to the user Oh okay Yeah Oh so that okay Okay so sometimes And I you know I haven't participated in ICOs so sometimes you send the money But then you don't get the token until later

Yes yeah Okay So that situation you just they just send back the money, send back the ether or Bitcoin. Okay. But then what about other situations where the tokens were already trading? Yeah, Neo is already trading. So we offered a refund option.

But until now, I haven't seen a request for refund because it's more profitable to sell them in the market than get a refund. Oh, really? You haven't seen a say. Oh, but it's voluntary. So it's not like, oh, I see. Not compulsory, yeah. Oh, interesting. Okay.

And not a single person has requested a refund? Yeah. People are not silly. Okay, okay. So, yeah, I guess it's not as complex a process as I imagined. One other thing I wanted to ask about was we were talking about the silly projects that, you know, are not blockchain related at all that were trying to hold ICOs. And I saw this one report that said the PBOC claimed that 90% of all the ICOs in China were fraudulent. Do you think that's true? And if so, what examples do you have of that?

I think Mooncake, MCO is a good example. Okay. Why was that, why was that fraudulent? I'm not sure what is the exact word they used. I read that statement, but I'm not sure if, if they use the word fraudulent? So, but the way that worked was something like, let's say, I am a mooncake bakery or a mooncake company, and I say, okay, I'm going to issue these tokens and then you can redeem them for mooncakes. Is that what the structure of this was? Yeah, yeah. That's how it works in the white paper. But why would that be fraudulent? I mean, it just seems like a stupid reason for

token, but I don't know if it's... Yeah, I think it's based on that many of the projects, they don't have, they don't even have a technical person at first. When they started ICOs, all they have is idea. And after they get money, they may start to hire some technical, real technical person to do that job and they may not. Oh, I see. Like they're just kind of marketing, hey, we're going to have an ICO, but they don't even

have any. Wow. Okay. Yeah, you don't have any concrete architecture for the product. Meaning that it sort of felt like they were just going to take their bitcoins and ether and then not even issue tokens? I think they will issue tokens, but their real intention is not to build the product. Their real intention is to get the token, the Bitcoin or Ether from the ICO and spent a small portion of it.

to deliver a so-called product, and they can keep most of the money. Oh, wow. Yes. Okay. The token is useless sometimes. And did the regulators contact those issuers? And, you know, I'm not sure, you know, what they would do exactly, but, you know, bring some kind of regulatory action against them?

Like, do you know of any particular ICOs where the regulators came in and said, hey, like, you're violating this or that law? I'm not sure. I haven't been contacted by the regulators. Yeah. So Patrick. Yeah. I think, you know, in China, why the PBOC, they say like 90% of the project,

it's like a scam was a very bad project. Because, okay, because I read some news like, you know, in China we have some ICU project. You know, the ICU, it's just a, um, it. method for you to raise the money. Yeah, ICO itself is not a scam, but some ICO project is a scam. Yeah, so that's a reason, like,

but you know, in China people, they cannot really distinguish the difference, like most of the public people, most of the people, they do not really understand what's really, it's the ICO and the ICO project, you know? They think, oh, all ICO is a scam or the ICO itself

is a scam. I think it's a different concept. Yeah, Another reason why the regulator is so angry or so, like, so strapped, it's because, you know, in China we have some, like, bad people, like they use the ICO name to do scam stuff, like, they scam people. Like, there's some Ponzi scheme in China, maybe some, like, fake coin or some Ponzi scheme coins. So they use, oh, they say, oh, I'm doing the ICO, you must, you give me your money, and I will pay you back every month. yeah there is like a like i think maybe there's a there's a there's some amount of a policy scheme in china yeah in cryptocurrency world yeah uh it's like the dark side of the of the of the cryptocurrency like they have nothing they they only have a website they do not have

any they do not have any experience with the blockchain industry they don't have any any experience with the development of work they just build a website and uh you Tuesday is upon this scheme. Yeah. So their initial idea is to scam people, but they say, oh, I'm doing an ICO, you know. That's kind of like already devalued the ICO concept in China. Like when people hear about the ICO, they say, oh, I feel it's most likely the scam, you know. But that's the reason.

It's because too many bad people, they use the ICO concept in China. Yeah, they kind of like make an ICO become a bad world in China. Yeah. And for those Ponzi schemes, did they raise a lot of money? Were they pretty successful? I don't know too much, but from what I heard, like, yeah, there's a few Ponzi scheme. Like, I think they scammed some people, and they raised some money. Yeah, and they also released the coin.

But the coin is just like it's meaningless, you know? You give your R&B to them or give you a USD dollar to them, and then you get a coin. And the coin itself is meaningless. Well, that's too bad. Yeah, I think that's also why the regulators swangering, why they made the most abstract regulation on ICU in China. I think their original target is not the good project in China. Their original target is a policy scam in China.

So then why do you think they made the bans so complete instead of just trying to target the bad actors? Maybe the reason is like, you know, because, okay, the good project also have some risk, but the bad project, 100% totally risk, like no real use case, yeah, no real use. Yeah, so I think from the regulators point of view, it's like, okay, it's kind of crazy, all the ICO is crazy right now. I think the idea is like to, okay, let's the

community, not the community, let the, you know, the train to come down and to stop it right now and to let people think about this. Oh, okay. Well, so this actually is the perfect segue to my next question because I also saw a report that said that the ban is only

temporary. And I guess someone in China, know, unfortunately, I didn't write down the name, but somebody with some authority who said that he thought that it was going to be temporary while the lawmakers hashed out the regulations. And, like, again, all of this is just conjecture. But he also said that he thought maybe ICOs would only be allowed if the teams get licenses first. Of course, I think this is all just guesses. But do you think that the ban is temporary and if so,

how long do you think it will last? I think it's very hard to predict the government's attitude, you know, because I think it depends on, it depends on the public's reaction. Yeah. And it's also

depends on the regulator themselves. And it depends on all the financial environment in China. Yeah, so it's harder to say it's temporary ways forever. I don't know the answer. Yeah. But Yeah, but the time will change then we will see what will happen. Yeah, because if the financial environment become bad in China, I think the ICA ban is forever.

But if the financial environment in China become much better in one year or two year, maybe the government will change the attitude on ICO or on Bitcoin. Oh, interesting. Yeah, my take is, yeah, my take is according to the words they use. I don't think they intend to be a temporary ban. So don't wait, don't expect like two months or a few weeks later. They declare licensing some ICU. I don't think so.

Yeah, I don't think so too. Yeah, maybe no licensing forever, no ICU forever. It's possible. Yeah. But I want to clarify one thing is that the China government only banned raising money from general public. They did not ban raising money privately. So you can still do a token raising in China

as long as you do not pitch to the general public. And there are no more than 200 investors in the project. And you do not promise a return of profit. So that will be fine. That would be okay. Still perfect legal. And do you know if some of the, teams that were planning to do ICOs, are they planning to do it that way now, to fundraise that way now?

I think it's a very sensitive period. So no team in China will want to do an ICU at this kind of situation, no matter it's private or public. Yeah, but I know a team like, yeah, the earlier they wanted to do, they want to do a public offering to the public, the ICO, the token. But I think right now after the regulation came out, they wanted to do a private offering to the, like the angel investor. Yeah. So, yeah, I know a team they are trying to do this in

China right now, yeah. Okay, so basically this thing that I read where someone said that the ban is probably temporary, you think that's just a rumor and probably not likely to happen? I think it's a rumor. Yeah, I think there's some, yeah, it's a rumor.

Also, there's some misunderstanding, you know, you know, sometimes, Even in China, we have different opinions from the government. I mean, not from the government. You know, some people, they say the ICA ban is temporary, but in some journalists from some other countries, they translate it this, you know. But it's not a representer the government. Yeah, the government always have the same opinion.

And, yeah, you know, I think, yeah, it depends on the government's attitude. It depends on the public reaction. It depends on the financial environment. It's not a simple ICO in China. I think even this kind of regulation, it's a very high-level officer, very, very high-level, guys. They made this kind of regulation. It's not just the PBOC or just one department in China. It's seven, yeah, seven, seven like a mostly influential department in China.

They made this announcement, yeah. Okay. So something else I was curious about was. that I read, and granted, obviously I don't speak Chinese, but I read that the language of the ban made some kind of distinction between virtual currencies like Ethereum versus tokens. First of all, is that true? And if so, what is that distinction? Because, I mean, Ethereum did do an ICO. It's just long before ICOs were such a big trend. So I kind of am not really sure how. they're distinguishing between what is legal versus what isn't legal?

I think all in legal. Even Ether now? Yeah, even Ether, even Bitcoin. You know, the reason is like, okay, very few people, they know the difference, like the crypto currency and the token. You know, personally, I think even Ethereum, even Bitcoin, it's just a token. It's just a simple, in a bit of blockchain. network, it's just a token, yeah.

But, you know, the token, I think the regulator, they don't know the clear definition of the token and the cryptocurrency. Because in the whole industry, we don't have this kind of clear definition. Yeah, I mean, even in Silicon Valley or even in any other countries, any other, like, an area, no one give a very clear definition on, like, what's cryptocurrency, what is a token, like, what? what is like a currency, what is the cryptocurrency, you know, no definition at all.

Yeah. So in China, like some translation, like, okay, they call it a token, but the token have a very wide, like, a definition. Even cryptocurrency is a kind of a token. Yeah, even Bitcoin, even Ethereum, it's kind of a token. So, but, you know, the reason, like, you know, sometimes even the regulator, they do not have too much technical background. Yeah, it's hard to distinguish.

it's even hard for us to distinguish what's a difference, even for the experts in this area, in this blockchain area. No one gives a very clear definition. But from the other, like from the further action, or the further move over the PBOC and the regulatory department, like, you know, BTC China, they will shut down the exchange. So that basically means like no matter what a token you are trading, what a cryptocurrency you are treating,

exchange platform you need to delisted it in three months yeah yeah actually I have a different opinion with Patrick yeah the PBOC a document they use two words one is in Chinese it's Dai B or you can translate it to a token or it also means substitution it also means substitution in China a Chinese so it I think it refers to those tokens that mostly are ERC 20 tokens. They claim to have their own token, have a specific usage,

but they issued before their magnet is launched. So probably PBOC is using a token to refer to those kind of virtual currencies. And they also used shunni or virtual currencies. I think this word refers to, the tokens that had already had their mainnet and is up and running. So they used the two different words.

And I have seen repeatedly in some official media said we need to separate Bitcoin, Bitcoin exchange, and blockchain technology. So the government is encouraging blockchain technology. and that's their stand on blockchain technology. And they also said Bitcoin is legal in China. And Chinese citizen can lawfully hold and even trade in person with Bitcoin. But Bitcoin exchange is not legal at this moment because any centralized exchange should be licensed under the Chinese security law. So all the Bitcoin exchanges are centralized exchange in China, and it's actually, it's not legal. I want to pick apart a few of the things that you mentioned with this distinction that you were saying that you, you know, that you saw in the language where they had these different words.

So for the token one, you thought that that was referring to tokens that had been issued where the main net had. not been launched? And then the other word, that referred to any token where the mainnet has already launched? Yeah. Oh, interesting. Okay. Let me say it this way. The token, the word token they used refer to those ICUs, the tokens issued by the ICUs,

and virtual currency is referred to the token that is raised, that they used. as a funding method, like Bitcoin, Ether. Oh, interesting. Yeah. So then it doesn't matter if the tokens main net has launched. It's only about, you know, what is being issued versus what is being received. I don't know. I think there are two kinds of explanations here.

Yeah. I'm not sure. I think the regulators, they don't have a very strict definition. Yeah, that's true. Okay, yeah, but it is kind of curious. Why did they use the two different words and then which, which category does each token belong to? But actually, you know, when you were talking about how you felt like even ether or Bitcoin, you know, falls in those categories and how those exchanges were banned, I did want to talk about that. So right now it's Friday morning in China. And yesterday here in the U.S. or not yet, well, for me, it's the same day this morning when I woke up, I saw the news about Bitcoin exchanges or at least BTCC, Bobby Lee's exchange. And, and And Bobby Lee actually also was on the podcast maybe about six months ago. But so I read that he was closing his exchange.

And it sounds like you're saying that the regulators are closing them all. Because even right now, as far as I know, I haven't seen that confirmed officially. Yeah, it's never confirmed officially. Yeah. But many media that was linked to the government had repeatedly reported all the will be closed. Okay. And why is the government saying that the exchanges have to be closed, but that peer-to-peer exchanges are okay?

Oh, sorry, you said this earlier, it's because they need to be registered first. So it sounds like this will be temporary, that they'll reopen? No, I'm saying that centralized exchange is you need to have a license to set up a centralized exchange. And all the Bitcoin exchange does not have a license. And I don't think the government were licensing them. Oh, so they all have to close. Yeah. And there's no chance of them getting licenses now?

I don't see that. Okay. So then does that mean that some traditional exchanges will be able to obtain these license to trade cryptocurrencies? No, I don't think so. depends. Shanghai stock. I don't think Shanghai Stock Exchange will do that.

Yeah. Well, the Schengen Stoker exchange will do that. I think no one will do this in short time, in short term, yeah, maybe in one year, two years, no one will do this.

Yeah. Okay. And why do you think that they decided to do that to ban the trading of Bitcoin? There are many reasons. There are anti-Moneyland reasons. There are capital control reasons.

Yeah. And one statement in the official media is that Bitcoin is not, there is no real use case of Bitcoin, and most of the use case are trading and speculation and sometimes involves criminal activities. So, yeah, I think there are many reasons. Yeah. I mean, do you think that the PBOC was right, that that's what people are doing and nothing else? I would say most of the activities around Bitcoin is trading speculation. That is. That is somehow true.

Yeah. Yeah, that's true. Yeah. But I think the, they view the, I mean, they take the whole cryptocurrency as like

in a narrow field. You know, you should see the future of the, of the currency. Like the future of the money in the world. Like,

you know, that's all the boxing people in this area. Okay, they think, okay, maybe by the, in 10 years or 20 years,

the Bitcoin will become the top five currency in the whole world, only after USD dollar R&B, yeah. I mean, you know, most of people in the blockchain area, they still believe like Bitcoin will become sometimes in the future will become a global currency. Yeah. Yeah, so what is the reaction to this ban versus the ICO ban? Is it pretty much the same, or do you think people are even more kind of disappointed or surprised? People are even more surprised and scared. Oh, scared. Why scared? You know, okay,

there are some new people. They joined the industry this year, maybe just a few months ago. And they all think, okay, the Bitcoin price will always go up. So some people, they may invest a lot into the Bitcoin. And, you know, after the, after the, after BTC China confirmed, they will close the exchange, you know. The price just wouldn't down like 25% or even 30% the Bitcoin price in China. So you can see like people may scare like, oh, Bitcoin maybe become useless in the future. And I cannot sell my Bitcoin in the future anymore. So, yeah, it's have some worse influence than the ICU banks.

Yeah, you know, after the ICU banks, some of the people, like, they still think, okay, I can still trade. my Bitcoin, I just cannot participate with the ICU anymore, but I can still take Bitcoin as a long-term investment. But, you know, after the BTC China confirmed they will close the exchange, I think that's bringing more influence in the society to the public.

Yeah. People are scared like, okay, maybe in the future, Bitcoin will go back to maybe $500, $1,000 a game. Yeah. And so for people that own Bitcoin and China, what are they doing? Are they all now panic selling on PTC China trying to

sell their bitcoins before the exchange closes or are they holding onto it and saying, oh, you know, a year from now, two years from now, it'll still be worth more. I can keep it and I can sell it, you know, person to person at that point. How are people reacting? I think the newcomers they're selling. Yeah, they're panic. Yeah, different actions. Yeah, people have a different reaction. Yeah, the true believers, the veterans in the crypto world, they are holding their coins, even buying more, buying when others are panic.

But the newcomers, they want to flip, they want to make a quick money, they want to buy today, maybe sell next week. They find out it's very difficult to sell maybe in the future, so they decided to sell it. And so once there is no trading anymore on exchanges there, the way that people will both buy and sell Bitcoin will just be peer-to-peer. Is that going to be something similar to local Bitcoins or how will that work? Yeah, I think so. I think it will be similar to local bitcoins, yeah. Yeah, the OTC market.

Yeah. So I actually heard that one of the over-the-counter trading desks closed, again, there's so many rumors. I really don't know if it's true. Have you guys heard that? And if so, do you think that that will happen to all the OTC desks? It's true. It's like there's an OTC company, not a company.

There's an OTC application. The name is B-Kan. Yeah, B-B-B-Kin. Yeah, it's B-Kan. So they closed the OTC yesterday, two days ago. Yeah. Oh, wow. Okay. And what are you guys doing?

Are you selling your bitcoins? Are you going to keep them? I'm keeping all my Bitcoins. I bought some yesterday. I love it. You're buying more. That's hilarious. Okay.

Well, so something else I was wondering about was in 2013, the PBC banned financial institutions from using Bitcoin. How would you say that this crackdown is different? Actually, in 2013, they did not forbidden the, uh, uh, financial institutions to use Bitcoin. They ask them not to facilitate Bitcoin trading. So many of the bank account of exchanges is closed. But now they don't just close the bank accounts. They shut down all the exchange.

So it's more severe. It's a harder blow. Okay. Well, so what do you think happens next? If you were going to make some predictions about where cryptocurrency in China is headed, what would you say? I think, you know, okay, the Bitcoin is not released by a central government or by any country. It's a global currency on the Internet. So it's hard to ban by one country or one government.

Because it's not released by the government themselves. So I think in the future, like, yeah, it's going to be harder for the people who want to buy. Bitcoin China, if all the centralized exchange like OKC coin or BDC, China closed. Yeah, but a few of the exchange platform, I think they already have the plan to go to overseas, to go to other countries to reopen the exchange platform. But, I mean, they reopen the exchange platform just a coin-to-coin trading, no theater money, no RMB or no dollar involved. Just Bitcoin to Ether, Bitcoin to Quantum, or Bitcoin.

to Nio. Yeah. So it's just a coin to coin trading in the future. I think it may be become mainstream in other countries. Yeah. So I think for the blockchain technology in China, yeah, it's still growing, but it will take a longer time. Yeah.

And some of the team in China, they wanted to move abroad. They wanted to move to other countries. Yeah. And yeah, I think the regulation for sure have some like, side effect on all the startups and all the big all the bitcoin all the blockchain related to the industry in china but as a future i think it's still bright yeah and what about you guys how do you plan to proceed with your own projects so our plane okay for quantum earlier it's pretty global project yeah but uh or but like a few in the last six last half a half a year um we

It works a lot in China. So right now, we may just change our focus to other countries, maybe to U.S., Korea, Russia. Yeah. But China is not the highest priority right now. We are moving to the main development work and the focus on the marketing, our energy to other countries. Yeah, and we have the plan to open office in Denver next month. Oh, that's really nice. Oh, wow.

Yeah, yeah. Yeah, Colorado's great. Yeah. And Hongfei, what about Neo? Yeah, my understanding is the intrinsic reason for the Chinese government to ban ICO and exchanges

is because it is somehow anti-government and somehow it's anonymous and anti-sensorship. Yeah. And I believe it is, it is, It is same in other countries, so even in the United States. So I think global regulation is inevitable. There will be other countries that may step in to the ICU or even exchange.

So I think anonymous or anti-censorship blockchance is not the trend for the next few years. I think it's necessary for the blockchain to be compliant to have digital identities to make the network compatible with current legal system. And we are at Neal, we are drafting a global legal framework for smart contracts running on Neal. So if they want to do a token raising, they can do it legally in most major countries. So that's what we are doing. And the same thing is we are going global. Neo is already quite global because I believe most of the new holders are currently

are not Chinese citizens. Many of them are in the United States. So we will organize events, meetups, conference in different countries. Okay. Well, this has been such a fascinating discussion. How can people get in touch with you? Yeah, my email is Da Hongfei at Neu.org, D-A-H-O-N-G-F-E-I-E-I at Neu. And I want to add that Neu is hiring.

So if you are a developer, if you are a promoter marketer, please send me a email. And Patrick? Yeah, so you can contact me through my email with Skype. It's both same. So my email is Patrick 8, quantum.org. Yeah, QTUM.org. That's the same as Skype account. Yeah, so, yeah, same like Neo.

I think all the project, like it's growing fast in blockchain area. So we are hiring two. Yeah, we wanted to hire some marketing director in US. Yeah, so if you have some strong background, welcome to join the quantum too. Yeah. Okay, great. Well, thank you both so much for coming on the show. Thank you, Laura. Yeah, yeah. Okay, thank you very much. Yeah.

Thanks, everyone, for joining us today for today's episode with Da Hong Fei of Neo and Patrick Die of Quantum. To learn more about them and to find previous episodes of the show with other innovators and thought leaders in the blockchain and crypto space, check out my Forbes page, Forbes.com slash sites slash Laura Shin. And be sure to follow me on Twitter at Laura Shin. new episodes of Unchained come out every other Tuesday, so if you haven't already, subscribe on iTunes or wherever you get your podcasts. If you liked this episode, share it with your friends who are looking to learn more about this rapidly involving space, and please rate, review, or send me feedback on who you'd like to see interviewed on the show.

Unchained is produced by me, Laura Shin, with help from Elaine Zelby and Fractal Recording. Thanks for listening.