The Fate of China’s Blockchain Innovation Talents and the Opportunities and Challenges of China’s Blockchain and Digital Economy Development
To Whom It May Concern,
We are the family members of “Liang Liang, Chen Hua, and Wang Yang were accused of organizing and leading pyramid schemes and illegally absorbing public deposits for founding the CoinXP public chain ecological exchange Hubdex” led by the Wuxi Municipal Public Security Bureau. We are also members of the CoinXP public chain team. Technology developers and entrepreneurs.
This case is a new type of case in the blockchain field. Many people involved in the case are Ph.D. graduates from Tsinghua University and Peking University and serial technology entrepreneurs. The image has even affected the entrepreneurial environment and business environment of high-tech enterprises across the country. We think it is necessary to write a letter to you, describing the original intention, history and industry development background of the parties involved in the blockchain business, and at the same time expressing our basic attitude towards the case, for your reference.
Liang Liang, Chen Hua, and Wang Yang are serial entrepreneurs with excellent character and learning, positive and optimistic, and full of innovative spirit. Each of them has remarkable struggle experiences, academic and entrepreneurial backgrounds. They got acquainted in the United States because they were both programming and trading enthusiasts. At that time, Liang Liang had already established Chengdu Benliu Logo Company in China. He was a typical early Chinese private entrepreneur. After a small achievement, he returned to school to study DBA. Finance; Chen Hua went to the United States to study for a Ph.D. after graduating from the Computer Science Department of Tsinghua University and joined IBM Silicon Valley Laboratory to engage in distributed network research; Wang Yang received a full scholarship from the State University of New York at Buffalo after graduating from Peking University. Scholarship to continue to pursue graduate and doctoral studies in biology, researching the direction of cancer. They have the same background of studying and investing in the United States across the ocean from China. They have the same obsession and talent for programming and trading, and they have become good friends who recognize and trust each other. Domestic Tsinghua University scholars who went to the United States to study for a doctorate in a prestigious school, they like-minded, established a quantitative fund in the United States together, and realized a comfortable and free life state early. Around 2005, Liang Liang was not developing science and technology. His ambition was far from just investing to make money, but hoping to participate in the rapid development of science and technology and economy of the motherland. So Liang Liang returned to China with the rich returns from quantitative investment and the top talents he had met and cooperated with in the United States, and began to investigate the industries he was interested in and start new entrepreneurial projects.
Liang Liang is a very rare self-driven learning, professional and innovative talent. This is also the unanimous evaluation of people who have worked with Liang Liang, ranging from scientists and academicians to partners who followed him in entrepreneurship. His growth process along the way is a small microcosm of Chinese private entrepreneurs working hard to get rich following the rise of China. When he was a child with a work-study program when material was scarce, he insisted on studying to change his destiny, and was admitted to a tuition-free teacher. He resolutely resigned to start a company when he was under the school’s key training. The company was taken care of by family members, and he went back to school to study DBA and financial studies, and then went to the United States to try out his idea of quantitative and high-frequency trading. After leading his trading partners in the United States to achieve substantial personal benefits, he persuaded these American Ph.D. students from top Chinese universities to return to China to start a business with him. I invested my accumulated funds, reputation and knowledge over the years, and started from scratch, looking for cutting-edge industries that I have worked hard for and dedicated to, only to continue to create miracles of development on the soil of China and realize human science and technology dreams.
In 2018, the success of the Ethereum public chain once again pushed up the market value of digital currency and the attention of venture capitalists. Three experienced technical teams in the field of venture capital began to study blockchain technology and its possible impact on the future. Although the highly anticipated “ICO issuance” in the blockchain industry has been clearly defined as “violation” by seven ministries and commissions in my country on September 4, 2017, and although the current laws and regulations such as the Criminal Law do not have clear prohibitions, the team attaches great importance to it. , resolutely do not do ICO. At the same time, for the technical geeks who see the value of Bitcoin and the underlying technology behind it, they firmly believe that the blockchain will reshape the business of the entire world. Therefore, they have been avoiding ICO to issue coins, to explore blockchain technology, Token (digital currency) in the Web3 network (value Internet based on blockchain technology) and industrial application development, as well as existing industry problems and risks .
Based on our industry exchanges in the blockchain venture capital ecology centered on Tsinghua University in China and Stanford University in the United States, legal compliance is indeed a key consideration for blockchain and digital currency entrepreneurs. Therefore, we Following the compliant development path of most international public chains, it did not initiate an ICO (Initial Coin Offering), that is, “issuing coins”, but initiated a blockchain project in the form of foundation registration in Singapore, which is also Well-known project parties with large transaction volume and currency value such as the Ethereum public chain, as well as the blockchain project tree map (Conflux) with technology as the core technology of Professor Yao Qizhi, a Turing Award winner in domestic universities, have consistently adopted a compliance method (the latter was established in 23 years On March 3, it has cooperated with China Telecom to try to support the blockchain SIM card in Hong Kong to realize the industrialization attempt). Moreover, for the fundraising of the CoinXP project, the traditional private equity financing method was adopted, and the qualifications and compliance of investors were strictly checked, unqualified investors were rejected, and professional investment in the field of blockchain and digital currency was introduced. People, and made a risk tolerance assessment and KYC review for investors to ensure the compliance of funding sources. At the same time, the team went to the United States, Japan, Israel and other countries to fully exchange and research in the process of researching the industry and identifying pain points. Liang Liang also met officials from the Japanese Financial Services Agency in Japan to learn how Japanese exchanges are regulated by the government. Prevent risks such as the loss of investors’ assets caused by malicious infringement of investors’ interests.
We always believe and stick to the mission of “solving industry problems and creating the underlying infrastructure of Web3” as the starting intention and behavior of the CoinXP public chain team. The original intention and practice of the establishment of the Hubdex ecological exchange is also because the team adheres to the goal of not speculating coins to increase the “value” of the project, but building a landing application, and using the actual operation and transaction of Hubdex to prove the feasible goal of CoinXP technology.
However, the CoinXP technical team and the founders of the Hubdex community were suddenly arrested by the Wuxi Public Security Bureau in April 2021, placed under residential surveillance, filed a case, repeated investigations, and supplementary investigations. After listening to the defense opinions, the officer has realized that we are a digital asset trading platform with a real profitable business model and cutting-edge technology support. There is no “rebate level”, no “props products”, and no “illegal profit”. Under some kind of pressure, the accusation was not dismissed. Instead, the entire continuous entrepreneurial process of the team was mistakenly divided into two parts. The first half was accused of “illegally absorbing public deposits”, and the second half was accused of “organizing and leading pyramid schemes”.One act and goal are subject to two different charges, and these two charges are mutually exclusive and contradictory: “Feixi” recognizes the value of the project itself, but usually causes large-scale investors to lose money and cannot be repaid, and “MLM” fundamentally Do not agree that the project has value, it is “deception for the purpose of defrauding others’ property”. However, our project has not caused any loss to investors from the beginning to the end, and no user has ever reported a crime. There are no props, products, fraud and illegal profits. Team members provide underlying technology and operation and maintenance services but do not hold HUBdex The rights and benefits, team office, platform registration place and user location have nothing to do with Wuxi City, Jiangsu Province.
At present, our case has reached the trial stage of the Xishan District Court in Wuxi City. At this stage, there were two supplementary investigations before and after, but the basic facts of the case were still not clarified. A large number of users and investors took the initiative to explain the situation to the court. So far, the case-handling agency still has not investigated and collected evidence from users.
Although we are experiencing the difficulties brought about by blockchain and digital currency innovation and entrepreneurship, I am not writing this letter to accuse our legal environment of wronging Chinese entrepreneurs and causing more blockchain Innovators in the blockchain and Web3 fields dare not let go of their hands and feet to create and explore, which has led to a growing gap between my country and the United States in the Web3 field. On the contrary, in the past two years of policy guidance, we have seen the Chinese government’s encouragement and support for blockchain technology research and industrialization, especially in Jiangsu Province, which is known as the “China’s economic engine”. The innovation support of the economy is more radical: in March 2022, Jiangsu released a three-year action plan for the promotion of blockchain applications; on December 12, 2022, the Jiangsu Provincial Blockchain Technology Innovation and Application Pilot Zone strengthened the support for the pilot zone and The guidance and services of the talent training base will increase support in terms of policies, funds, and talents, and accelerate the formation of the scale effect of the blockchain industry.
At the same time, in the process of handling the case in the past two years, our technology research and development checked all the underlying codes of CoinXP, the work group discussion records of all 7 Ph. It makes us believe more and more that the innovative technologies and applications we have made are indispensable explorations and attempts as a Chinese innovation team for the development of China’s Web3. And Liang Liang, Chen Hua, and Wang Yang, three serial entrepreneurs with innovative ability and adventurous spirit, are also indispensable and valuable talents in the development of science and technology and business in our country.
China only had its own joint-stock companies in the 1970s, and the securities market was re-established in 1990. Prior to this, securitizing the rights and interests of individual companies was also a move that surpassed laws and regulations, but today it is an inevitable path for the development of world finance. From now until 2022, my country’s modern finance has developed for more than 30 years. Compared with the 200-year history of financial development in Western countries, it is indeed young and inexperienced. This requires our talents and entrepreneurs to be willing to try and explore, of course, under the premise of assessing and controlling reasonable risk exposures and avoiding losses to investors. Not long ago, Mr. Li Yining, who participated in the legislation of our country, promoted the reform of the shareholding system, and participated in the drafting of the “Securities Law” and “Investment Fund Law”, passed away. At that time, Mr. Li was appointed as the leader of the drafting team of the “Securities Law” as an economist. This was proposed by Comrade Yang Wanli, Chairman of the Standing Committee of the National People’s Congress — — The “Securities Law” covers a wide range of areas, and it is not appropriate for a certain department to preside over the drafting. Experts from the Standing Committee of the National People’s Congress can preside over the drafting. This ushered in a milestone development of the Chinese economy, although it was 61 years later than the 1933 US securities law. Today we see cutting-edge technology and ecological development in the fields of Fintech and Web3, which are also led by American innovators, thanks to the United States taking the lead in experimenting with laws and regulations. For example:
The U.S. Financial Crimes Enforcement Network (FinCEN) does not consider cryptocurrencies to be legal tender, but considers cryptocurrency exchanges to be money transmitters because cryptocurrency tokens are “other value in lieu of money”;
The U.S. Internal Revenue Service (IRS) does not consider cryptocurrencies to be legal tender, but defines them as “a digital representation of value serving as a medium of exchange, unit of account, and/or store of value” and has taxed guidance accordingly;
Cryptocurrency exchanges are legal in the United States and fall under the purview of the Bank Secrecy Act (BSA). In practice, this means that cryptocurrency exchange service providers must register with FinCEN, implement an AML/CFT scheme, maintain proper records and file reports with the authorities.
The U.S. Securities and Exchange Commission (SEC) says it considers cryptocurrencies to be securities and applies securities laws across the board to digital wallets and exchanges. In contrast, the Commodity Futures Trading Commission (CFTC) has taken a friendlier “do no harm” approach, describing bitcoin as a commodity and allowing public trading of cryptocurrency derivatives.
Before Liang Liang created the CoinXP public chain, he decided that the blockchain and digital currency needed to be promoted to a national strategic level and vigorously developed. It was also because as a financial practitioner, he saw that the U.S. dollar had become a world currency since the Bretton Woods Conference in 1944, hence, digital currency based on blockchain technology are bound to become the technological track that major countries must compete for.
These innovators, with ambitions, innovative and adventurous spirits, are investing their valuable experience, knowledge, and wealth to strive on the new track of digital finance and improve world-class innovation.
After the CoinXP team was arrested, Wuxi police said that as long as the virtual currency is issued, it is a fraud, and once questioned that the HUB currency is an air currency. As a promoter of the Web3 industry, we believe that tokens are an indispensable factor for the blockchain network and Web3 network, and are the underlying elements to ensure the incentive mechanism of the blockchain. The Web3 network is not a simple technological innovation, but a unique set of economic system and ecological system, which is a brand-new economic system that is completely isolated from reality, derived from the blockchain as the underlying architecture logic. It does not require a central manager, but allows it to maintain, operate and upgrade through its own incentive mechanism. It has its own currency — cryptocurrency, its own organizational form — DAO (Decentralized Autonomous Organization), its own service model — smart contracts, etc. Just like Bitcoin, it is an autonomous payment system that is participated by people who do not know the world. Anyone who performs their duties in this system and earns tokens can join or withdraw at any time. will affect the operation of the system. A blockchain without a token incentive mechanism cannot form a sustainable decentralized system. If there is no token incentive, the blockchain must rely on trusted third parties to borrow external value media to motivate participants in consensus and verification, and the blockchain has no way to automatically distribute and transfer value. These trusted third parties become the central point of centralization, and the blockchain system is not decentralized at all. If the blockchain is an organic human body, tokens are similar to the blood circulation system, ensuring that all parts of the body are nourished and continue to work. A blockchain without tokens is similar to a lifeless marionette. The various parts are just pieced together, not an organic whole. Each part can only move mechanically under the action of an external string. It can be imagined that if the Bitcoin public chain has no tokens, an institution or organization must be needed to pay the participants of the verification nodes that run the mining. This is basically no different from the operation of Web2 centralized companies. The blockchain itself It also degenerates into a database with multiple redundant backups with hash verification, which is essentially the same as Web2’s cloud computing infrastructure.
Our predictive innovation behavior as technology developers and innovators may not be seen by the leaders of public security and law today, but one day in the near future will eventually experience the witness of history. Historically, the technologies and concepts of all innovative companies must be proposed, verified, and developed before the market demand is clear, and then use technological innovation to stimulate and implement market demand. Today’s “tokens” and “coin issuance” behaviors of public chains such as Bitcoin and Ethereum, as well as the rights and interests of the Hub platform of the CoinXP ecological exchange Hubdex, to some extent, surpass the prediction cycle of the market and lawmakers. However, the birth of every innovation is not that technological development matches user needs, but that technology moves towards specific scenarios after R&D and usability verification, and then empowers the real economy and completes the industrialization of technology. Liang Liang’s team formally developed the CoinXP trading layer public chain first, and then built the Hubdex community ecological exchange for feasibility verification. At the same time, they tested the physical needs with physical enterprises (Kweichow Moutai and e-commerce) and moved towards industrialization.
During this period, the team has been actively looking for ways to comply, and communicated with local governments such as Chengdu and Hangzhou (where CoinXP’s domestic development company is registered), expecting the national regulatory agencies to check and always pay attention to the disclosure of rules in the process of starting a business before comprehensive supervision The openness and transparency of data, and the security of user assets; the investors and communication partners of the team are all top public chain projects and technical parties in China’s blockchain industry, and jointly discuss the application of blockchain And the technical direction necessary for industrialization has a good reputation in the industry; the team purchased the services of Cobo Wallet, the strongest third-party digital asset custody company in China, for third-party custody services. After Hubdex was arrested by Wuxi police, the core team of Cobo Wallet moved from Beijing to Singapore as a whole.
Recently, Hong Kong has successively issued new policies expressing its openness to digital currencies. On October 31, 2022, the Financial Secretary of the Hong Kong Special Administrative Region issued the “Policy Declaration on the Development of Virtual Assets in Hong Kong”, expressing an open and inclusive attitude towards global innovators engaged in virtual asset business as an international financial center. On February 20, 2023, the Hong Kong Securities Regulatory Commission stated in a consultation document that individual investors will be allowed to trade tokens with large market capitalization on trading platforms licensed by the Securities Regulatory Commission, and will implement a new licensing system for cryptocurrency trading platforms on June 1. retail transactions are allowed. In fact, as early as October 4, 2019, the Hong Kong Securities Regulatory Commission (SFC) formulated regulations specifically for investment funds investing in virtual assets. On the other hand, it also confirms that the CoinXP team’s practice of only raising funds from professional investors is also in line with the current Hong Kong regulations.
In the past 10 years in the development of digital currency and blockchain technology, Hong Kong, China has long been seeking a balance in the absence of supervision or excessive supervision. This “Consultation Document” aims to open retail investors to trade large-scale encrypted assets and give corresponding trading platform settings Regulatory requirements reveal Hong Kong’s ambition to develop digital asset transactions. This is not only a substantive step, but compliance must also provide a better soil for virtual asset participants.
We believe that although mainland China is still cautious about virtual currency transactions, the judiciary still recognizes the property attributes of virtual currencies, and blockchain technology has been emphasized as a core technology since the 18th collective study of the Political Bureau of the Central Committee of the Communist Party of China in 2019 An important breakthrough for independent innovation. This time, Hong Kong relies on mainland China. After the end of the epidemic in 2022, continuing to release the signal of liberalization policies must be an important strategic direction for China’s overall digital currency. Hong Kong’s status as an international center has been greatly challenged in the past three years. Brain drain, weak innovation, and finance and technology urgently need to gain momentum. Once again relying on a strong domestic industrial chain and independent innovation power, it will become Asia’s financial center in the next two decades. center. In 2023, everything will recover. As Web3 practitioners, despite being accused by the Wuxi local case-handling agency in the criminal proceedings, the virtual currency is regarded as a worthless air currency. However, we firmly believe that once the innovation and development start, it will be better than we expected. The process is even faster and more violent. The Wuxi case-handling agency’s accusation of crimes does not conform to the objective reality, and it also clearly deviates from domestic and foreign regulatory policies and national development strategies. This has been verified.
Liang Liang, Chen Hua, and Wang Yang stood at the starting point of innovation, invested huge financial resources and manpower at their own risk, and formed a digital asset transaction public chain and exchange application with obvious technical advantages. The next step is to empower the real economy. It is fully in line with the strategic development direction of my country’s digital economy planning, and it is the innovative talents that the country has been vigorously promoting to introduce and protect. Controversies and doubts inevitably exist on the road to innovation. It is even more inevitable that private entrepreneurs and innovators touch the “grey area” that needs to be perfected. However, only by exploring in practice can we constantly correct, find the right direction, and contribute Valuable technology and experience. As a new generation of Chinese technology entrepreneurs, we cannot deny that innovation itself is the core competitiveness. Only with innovation can we have sustainable and high-quality development and win a place for the country in the era of digital economy.
Best Regards,
Liang Liang’s mother: Dai Qiaofang (18030819726)
