HomeLatestChina Crypto Ban Just Cost Them the Metaverse
China Crypto Ban Just Cost Them the Metaverse
February 22, 2022 - by Kevin Flynn
China Crypto Ban Just Cost Them the Metaverse
Shortsightedness has long-term consequences. As expected, the “Great Unplugging” of crypto initiated by the Chinese government is coming back to bite them, and it likely just cost China the Metaverse. The commentary in a statement released by the China Banking and Insurance Regulatory Commission (CBIRC) last Friday has exposed a fatal flaw in their policies.
The statement was a warning about potential fraud in the metaverse. That doesn’t sound like a bad thing, at least at first glance. The flaw was revealed by their language. The CBIRC cautioned against “false metaverse projects, cryptocurrency-related frauds, and overhyping of metaverse real estate.” Why would a country with a crypto ban issue that warning?
Western companies like Meta (FB) and Microsoft (MSFT) have embraced crypto as a medium of exchange in the metaverse. Alibaba (BABA) and Tencent (HKG:0700), the tech giants of the Far East, can’t do that because of China’s crypto ban. They both dropped 5% Monday morning. The CBIRC basically shot a torpedo into their own warships. You don’t win battles by doing that.
Crypto is the Key to Profitability in the Metaverse
Make no mistake about it. Financial transactions in the metaverse will not be conducted using fiat currencies. The rest of the world has already accepted Bitcoin (BTC), Ether (ETH), and NFTs. The inability to recognize that will severely hamper metaverse development for any tech companies based in China. They’re government policies are killing them.
Tencent was the largest gaming company in the world (by market cap) before this year, but they can’t dominate the metaverse without the ability to accept crypto. Microsoft took over the top spot in January when they bought Activision. They’ve been accepting Bitcoin for gaming since 2014. Tencent simply cannot compete with them.
Sony (SONY), the largest gaming company by revenue, accepts Bitcoin, Ethereum, Dash, Dogecoin, and Litecoin at their PlayStation store. They even filed for a patent in 2021 to take crypto for online sports betting. They’ve also invested $450 million into Epic Games, investors of Fortnite, to help CEO Tim Sweeney build his vision of the metaverse.
China is Betting on Digital Yuan
Institute a crypto ban to create a void. Try to fill that void with your own product. China is treating this like a blue ocean strategy with insurmountable barriers to entry. Their “digital yuan” is meant to be a replacement for Bitcoin, but it’s not a product market fit for a global economy. Someone over there needs to go back to business school.
Tencent recently added the digital yuan as a payment method for WeChat, which has over one billion users, most of them in China. The move was meant to help them compete with Alipay, which is Alibaba’s mobile payment platform. They’ve been using the digital yuan since last year, again mostly to a Chinese user base. That’s not an expansion. It’s a currency swap.
Will the digital yuan be adopted on a global scale? I wouldn’t bet on it. The appeal of DeFi is that it’s decentralized. Bitcoin is popular because no government controls it. Fiat currencies can be manipulated by Central Banks. That’s why we’re seeing the DeFi movement. China can’t see the forest through the trees, and it just cost them the metaverse.
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About the Author:
Kevin Flynn
A former financial professional and founder of AdvisorScale Financial Writing, Kevin lives in Leominster, Massachusetts with his wife Evelyn, two cats, and nine wonderful grandchildren.
