Cryptocurrencies December 28, 2022
Tight Regulations Push Chinese Metaverse Businesses Overseas
Chinese metaverse entrepreneurs are turning to overseas markets as the strict regulatory landscape back home is pushing them away.
World over, metaverse and Web3 have become the buzzwords with tech companies and entrepreneurs scrambling for exciting business opportunities.
Parent firm of TikTok – Byte Dance has designed two metaverse apps while other tech giants Tencent Holdings, Alibaba Group and Baidu are investing in metaverse and Web3 projects.
Also read: What Are Hypernetworks?
Developing these and more projects is however difficult with Chinese authorities taking a tough stance on cryptocurrency.
Regulations in some markets have become strict after a combination of factors caused a freefall on some crypto asset prices as well as collapse of some high profile crypto currencies, rising inflation and impact of the conflict in Ukraine.
In China, the regulations have made investors think twice about digital assets and look elsewhere like Singapore for security of their investments.
What is the metaverse?
The metaverse is a fully immersive, persistent virtual world where with the help of high tech goggles and other kit, people interact, work and play via online avatars of their real world selves.
Web3 is the term used for a new, decentralized internet based on blockchains. Businesses, investors and developers predict the metaverse could form the next generation of the internet.
Mark Zuckerberg has become the most famous promoter of the metaverse. The renaming of Facebook as Meta in October 2021 has accelerated the race among tech giants in the US and Asia to turn the idea of the metaverse into reality.
A report by consulting firm, McKinsey & Company says global investment in metaverse businesses topped $120 billion during the first half of the year, which was more than double what was recorded in the whole of 2021.
Gaming in particular is projected to continue growing with 3.2 billion people expected to be active players for 2022, spending a combined $196.8 billion according to Newzoo.
Chinese warm up to metaverse
According to China Briefing, Chinese technology companies have started testing the water by developing metaverse type apps, trademarking metaverse related phrases and investing in the virtual reality (VR) or augmented reality (AR) segment.
Baidu was the first Chinese firm to launch a metaverse app in December 2021, under the name “Land of Hope.”
Tencent has taken several initiatives to make its offerings more virtual.
So vast is the excitement around metaverse that it has also attracted more scrutiny from regulators. Concerns are these tech developments may be used for illegal activities such as money laundering.
Tencent laid off staff at its NFT purchase and collection platform Huanhe amid strong regulatory scrutiny of transactions in digital assets in Chinese mainland. The firm has since invested in Australian NFT startup Immutable, which is developing a blockchain based online game where NFTs can be sold.
Earlier this year, Hong Kong Chinese listed livestreaming company Inkeverse Group launched an NFT project called Hootlabs selling NFTs that can be used as profile pictures by social media users. However, Inkeverse has forbidden Chinese mainland-based users from accessing its services.
Paradise in Southeast Asia
Countries in Southeast Asia have become a primary destination for Chinese Metaverse and Web3 companies due to looser oversight on cryptocurrency and proximity to China.
Market insiders say a lot of Chinese coders have either moved to Singapore for Web3 projects or are working on them remotely from China.
“Singapore is the best place for Chinese nationals to start a Web3 business in terms of culture and operation cost,” said a Singapore based Chinese Web3 entrepreneur cited by PingWest.
Some Chinese private equity investors have joined global venture capital investors to set up offices in Singapore and invest in local Web3 projects, according to market insiders.
“There are more and more investible metaverse and Web3 projects most of which are founded by Chinese entrepreneurs,” said Li of Initiate Capital.
Chinese metaverse entrepreneurs in a fix
While Southeast Asia has been more accommodating, the Chinese entrepreneurs are now facing a shifting regulatory framework for cryptocurrency.
In November, Singapore’s financial regulator issued a warning on risks in cryptocurrencies trading after FTX’s dramatic failure. The crypto exchange fell from a $32 billion valuation to insolvency as customers who scrambled for withdrawals dried up its liquidity.
This caused rival exchange Binance, which is the world’s largest cryptocurrency exchange to walk away from potential bailout.
The Monetary Authority of Singapore has since ordered Binance to stop registering users in the country as it has not been licensed.
Experts say this stance could dent prospects for metaverse and Web3 enterprises. Ning Xuanfeng, a partner at a law firm King & Wood Mallesons told Caixin that these enterprises also need to pay close attention to legal issues including anti-money laundering, tax compliance, intellectual property rights and anti-monopoly.
Floki Inu (FLOKI) Volumes Surge 300% on China Metaverse Game Plans
The price of Floki Inu (FLOKI), a memecoin inspired by Elon Musk’s pet dog, jumped 15% on Sunday and trading volumes soared over 300% on Monday. The rally came as traders and investors bet on the project, which is pushing to attract more users for its Valhalla metaverse game in China.
FLOKI surged from $0.00003120 to $0.00003587 over the weekend, according to CoinGecko data. Trading volume for the token climbed to $99 million on May 29, up nearly 300% from the previous week’s average of $25 million.
As of writing, however, the price of FLOKI fell 2% on the day to $0.00003291 and average 24-hour trading volume dropped to $17.12 million. The token is down more than 90% since its all time high of $0.00033651 on Nov. 4, 2021.
Chinese flock to FLOKI
Floki is a cryptocurrency that began life as a memecoin but has evolved to become a fully fledged web3 project. Created in Sept. 2021 by an anonymous team of developers, the Floki ecosystem now includes a decentralized exchange, an NFT marketplace, and Valhalla.
In February, the team announced it would be targeting China in its latest push to attract more players for Valhalla, a play-to-earn (P2P) metaverse game that allows players to earn FLOKI tokens by completing quests and battling other players.
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Since the announcement, Floki now has a Chinese website and its technical documents, including the whitepaper, are available in the language. Floki is working with Btok, a popular web3 social network in China, to “introduce FLOKI to 10 million Chinese crypto users.”
Floki has also been running ads for Valhalla during some of the biggest sporting events in China such as the Chinese Super League and the Chinese Basketball Association. It also sponsored the just-ended World Table Tennis Championships Finals in South Africa.
The ads have helped to raise awareness of the metaverse game among Chinese gamers.
“We’ve gotten an influx of Chinese traffic today due to the CCTV-5 [the main sports channel in China] feature, and we want to remind you that FLOKI is strategically positioned for Hong Kong and China opening up to crypto,” said the Floki team in a tweet.
We've gotten an influx of Chinese traffic today due to the CCTV-5 feature, and we want to remind you that $FLOKI is strategically positioned for Hong Kong and China opening up to crypto.
Below is our "China Plan", which highlights our strategy for China:https://t.co/Zn7NDGdQ6q
— FLOKI (@RealFlokiInu) May 28, 2023
Hong Kong eases crypto regulations
The focus on China is a major development for Floki. The Chinese market is one of the largest and most lucrative in the world, and if FLOKI can successfully tap into this market, it could see significant growth in the coming years, observers say.
Floki’s China push comes at a time when the Hong Kong government is expected to legalize crypto trading starting June 1, allowing citizens to invest in assets such as bitcoin (BTC) and ethereum (ETH) on regulated crypto exchanges.
“While FLOKI is a global cryptocurrency our goal is to be the most known/used crypto. That won’t be possible without China and Hong Kong,” the team wrote on Twitter.
The Chinese version of Floki’s play-to-earn metaverse game Valhalla will be released in the second half of 2023 and will feature a variety of gaming experiences like racing, fighting, and role-playing, it added.
On mainnet, users would have to hold a certain amount of FLOKI in their wallet to make a character playable. The game is still in development, but it has already generated a lot of excitement among the Floki Inu community
Hong Kong Police Launch Metaverse Platform to Fight Cyber Crime
The Hong Kong Police Force cybersecurity unit has launched a metaverse platform, CyberDefender, to promote metaverse crime prevention and highlight the risks associated with Web3. The initiative will equip citizens with skills and strategies relevant in tackling technology-related crimes in the digital age.
The city is also ramping up its regulatory efforts to prevent criminals from using crypto to launder money.
Also read: UK Police Record Child Abuse in the Metaverse
To mark the launch, the police force organized an inaugural event titled “Exploring the Metaverse” within the virtual realm.
This is an initiative to raise public awareness regarding the potential risks linked to the metaverse and Web3, at a time when digitalization is fast growing and gaining traction all over the world.
The launch event took place across three virtual venues and was organized on the newly-launched platform with the aim of engaging participants in proactive conversations about ensuring safety within this virtual realm.
During the event, chief inspector IP Cheuk-yu from the Cyber Security and Technology Crime Bureau (CSTCB) presented on the dangers associated with Web3 and urged the public to exercise caution.
Metaverse a breeding ground for criminals
There have been reports on cases of verbal and sexual harassment within VR games that surfaced last year. Later, campaigners said an avatar of a 21-year old researcher was sexually assaulted in Meta’s VR platform Horizon Worlds.
“All crimes in the cyberspace could also happen in the metaverse such as investment frauds, unauthorized access to systems, theft and sexual offenses,” said the chief inspectator.
UK police forces also recorded 45 cases of child abuse in the metaverse while 30,925 individual offences involving indecent images of children on social media platforms were also recorded in 2021-2022, according to figures from the National Society for the Prevention of Cruelty to Children (NSPCC).
The chief inspector further emphasized that the metaverse presents potential dangers such as hacking and theft of digital assets by modern cybercriminals.
“The decentralized nature of virtual assets in Web3 may also increase the likelihood of cybercriminals targeting endpoint devices, virtual asset wallets and smart contracts,” he added.
Attendees at the event were enlightened about the advancements made in combating crypto crime and the ongoing efforts to mitigate its impact, providing valuable insights into the evolving landscape of cybercrime and efforts taken to curb illicit activities involving digital assets.
Increase in cybercrimes
In 2022 alone, the city witnessed a staggering 2,336 virtual asset related crimes, according to the Hong Kong Police Force in a press release that accompanied the launch.
The incidences resulted in financial losses of $1.7 billion for victims. Figures from the police force also show that 663 cases of a similar nature have already been reported during the first quarter of 2023 alone.
These losses amounted to $570 million, an alarming increase of 75% compared to the same period last year. The police stated that most of the cases involved virtual asset investment.
“Criminals took advantage of the public’s lack of knowledge about virtual assets and lured them into non-existent investments,” they warned.
According to the police, such figures underscored the urgent need for proactive measures to address the rising trend in virtual asset-related crimes and protect individuals from significant financial harm.
City gets tough on money laundering
Concurrent with the introduction of the new metaverse platform, the Hong Kong Securities Regulatory Commission (HKSRC) released revised anti-money laundering (AML) guidelines.
The guidelines outline the tactics employed by offenders to launder money through digital assets and offers comprehensive measures for financial institutions to shield themselves from illicit engagements. Changes include enhanced Know Your Customer (KYC) and due diligence requirements.
Enforcing the enhanced KYC rules means Hong Kong is stepping up efforts to prevent dirty money from flowing through the city, which will also make it less attractive for criminals to use crypto for their illicit transactions.
Under the updated guidelines, institutions that facilitate crypto transactions valued at 8,000 RMB or more must collect identifying information about both sender and receiver.
The increase in cyber-related crimes is pushing authorities to aggressively tackle the problem and raise awareness among the public.
Aside from Hong Kong, other jurisdictions adapting their AML guidelines to keep up with the use of digital assets by criminal networks include Japan, which recently announced stricter AML rules for crypto transfers. The country will specifically impose what is known as the “travel rule,” whereby exchanges must ensure details about the sender are shared with other parties.
If effective, efforts to fight crime are expected to be as international as the criminal networks themselves. Last month, reports suggested the International Revenue Service (IRS) would deploy cyber agents internationally to investigate the use of crypto in financial crimes.
Metaverse Token DeepBrain Chain Soars 200% Due to AI Progress
Metaverse token DBC is one of the best-performing digital currencies in the first five months of the year. And its bullish cycle has been sustained by the release of a progress report with an emphasis on many areas including artificial intelligence (AI).
DBC is the native asset of DeepBrain Chain, a platform using blockchain technology to build a scalable, distributed high-performance computing network. Its value has increased by more than 200% in value year-to-date (YTD), data from crypto price tracker CoinMarketCap shows.
On-chain data indicates that DBC was trading hands for $0.0039884 on May 24 after starting the year with a trading price of $0.001145 – a 248% rise in five months.
While DBC has benefitted from positive market sentiment, there are salient price drivers behind its rally.
Progress Report powers DeepBrain Chain’s ascension
Metaverse token DBC’s ability to sustain its gains is down to the work done by the DeepBrain Chain Team.
On May 21, the team released Progress Report Number 133 and provided updates on Product Development Progress, Marketing Progress, and Ecosystem Building.
Under Ecosystem Building, the development team highlighted Haibao GPU Cloud – a platform that allows people from across the globe to rent GPU power at affordable prices.
According to the report, DeepBrain has used its technology to help with artificial intelligence (AI) face-changing application testing. “The platform supports A-series GPU A5000, A4000, and 30-series GPU for trial testing. It can automatically replace human faces according to view screenshot sampling, and provide marketing support for wig customers,” the DeepBrain team said.
AI-Generated Content (AIGC) was also featured in the report. AIGC is where AI is used to automate the information creation process while fulfilling the personalized requirements of users.
Over $4m added to DBCs market cap in May
DBC opened May with a trading price of $0.03007 and reached a month-high price of $0.004202 on May 23.
On the first day of the month, the project’s market value stood at around $8.6 million, and this increased to approximately $13.2 million as of 11:00 UTC on May 24.
Within three weeks, the buying and selling activities of traders improved DBC’s market value by about $4.6 million. This explains the token’s ascension by 40% in May.
DBC is supported by three cryptocurrency exchanges, namely Gate.io, Huobi Global, and BitMart.
In crypto, one of the primary drivers of price is exchange listing. Aside from the aforementioned platforms, some of the largest exchanges by trading volume such as Binance, Deepcoin, Hotcoin Global, Upbit, MEXC Global, Coinbase, KuCoin, JPEX, Kraken, and Gemini are yet to add support for DeepBrain Chain’s novel token.
Should this happen along the way, DBC could conceivably become a top 500 crypto by market value. In the process, it may compete with other metaverse tokens such as ApeCoin (APE), Decentraland (MANA), Alien Worlds (TLM), Internet Computer (ICP), and the Sandbox (SAND).
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