China May Look to Build Own DeFi Network
As China-related platforms such as OKEx, Huobi, and Binance focus on their own decentralized finance (DeFi) applications, Finxflo’s CEO has hinted on why he thinks China may be looking to create a DeFi ecosystem as well as a way to create capital control in the space. James Gillingham said in a Forkast interview that DeFi in China has been evolving rapidly particularly with the Blockchain-based Service Network and may be about to go a notch higher.
“They have also had their eye pretty much on DeFi for a very long period of time,” he says. “They have now moved with Huobi – Huobi has created a DeFi network – and they are actually supporting that. With the Shanghai College, they now have the full support. They are actually backing it through Huobi. They are now moving into space by using non-governmental vehicles (so they are) using the private sector to be able to do that.”
From OKExChain’s decentralized blockchain to Huobi’s 10 new members to its consortium, and Binance founding a $100 mln fund to bring developers to its decentralized Binance Smart Chain, they have been driving interest in DeFi with a focus on China. There are also suggestions that the rising DeFi interest has been driving investors from known centralized exchanges to decentralized exchanges thus increasing pressure on the large exchanges to push the DeFi market further.
“We are slowly seeing the adoption but it is too early to say that they are into space, especially the major banks,” Gillingham said in the interview adding that the wallet infrastructure released recently by some state banks indicates that the CBDC is getting closer though he is not really certain that China is yet ready from an infrastructure standpoint. “However, if you look across the region, if you look into, to say Thailand, Thailand is now actually creating their own DeFi network especially within the bond space. So they have their Thai bonds and they are also creating their decentralized finance space. Essentially, I believe that China would also move with this new decentralized finance approach. I think they would probably look to create their own ecosystem in order to keep their capital with their remit.”
He adds that getting into China’s growing DeFi space is not the problem but getting out of it since DeFi, in its nature, is an anti-governmental centralized approach and he expects the market to move towards a situation where China would want to be able to ensure the amount of capital leaving the country in the next three to six months. As DeFi is set up for smart contracts which are meant for P2P exchanges, transactions would be hard to track and trace contrary to China’s expected centralized approach. He said:
“What that essentially means is that the government is going to be taking a very close microscopic look at exactly the DeFi space and they want to be able to essentially create capital controls, inflows and outflows out of China. As I previously mentioned, I believe China would have to move into the DeFi space in a big kind of way. They’ve already done that with Huobi, partnering with Huobi, and we also anticipate that there is going to be potentially a new Chinese DeFi network.”