Chinese venture capital firms are taking another look at blockchain, according to an article by Nina Xiang on Coindesk. After the 2018 crypto crash, up to 90% of blockchain-focused VCs left the market. Now, as China’s central government pushes for greater blockchain adoption, some are returning.
During the first six months, Chinese blockchain startups raised $368 million via 71 funding deals, according to Chinese financial data tracker 01Caijing.
VCs are finding it easier to raise money. Hong Kong-based Kenetic, which started in 2016 with a few partners trading their own capital, is on track to close an eight-figure fund next month, said managing partner Jehan Chu. NEO Global Capital, a fund backed by the NEO crypto project, has also been raising a second fund of about $50 million since June.
It is among numerous funds that are raising new vehicles this year because of a renewed sense of optimism. At the same time, VCs firms are diversifying away from equity plays in startups towards areas such as secondary trading and bitcoin mining.
These include Sora Ventures, an early-stage blockchain investment firm that entered the secondary market trading earlier this year. Its trading activities include swap, futures of mostly mainstream cryptocurrencies, which takes up about 20% of its asset-under-management, said founder and managing partner Jason Fang.
Fundamental Labs, a $500 million-under-management blockchain fund that has backed Coinbase, Canaan Creative and Binance, invested $44 million in bitcoin miners in May that could increase the bitcoin network’s total hash rate by at least 1,000 peta hashes per second (PH/s).
And Parallel Ventures, a blockchain VC founded by Yizhou Zhu, a former investment director at FreeS Capital, also invested in bitcoin mining equipment this year via a separate unit. The investment boasts a computing power of about 300 PH/s that’s worth about $15 million. FreeS has backed Chinese and US tech startups including Uber. It also manages assets for other investors who are interested in the crypto space and completed raising a 200 million yuan ($28 million) new blockchain fund in August.
Regulatory framework
Blockchain investors were given a boost last week by the passage of a new cryptography law, which according to Chinese media, will come into effect on January 1, 2020. It will tackle all the regulatory and legal challenges blockchain companies face, Crypto Gibraltar reported.
The law was passed just a day after China’s President Xi Jinping called for increasing support for blockchain development in the country. Many believe that Xi’s encouragement of blockchain research and innovation was what prompted Bitcoin‘s massive rally over the weekend, in which the coin’s price jumped by more than $1000.