The Chinese government announced the extradition of the mastermind behind a multi-billion-dollar crypto pyramid scheme from Thailand, according to an Aug. 23 statement.

The Chinese Ministry of Public Security identified the suspect as Zhang, who was extradited on Aug. 20. Zhang is accused of leading a $14 billion crypto pyramid scheme.

Zhang allegedly began his operation in 2012, attracting investors to his ‘MBI Group’ with promises of high returns. Victims paid between 700 Yuan ($98) and 245,000 Yuan ($34,300) in cryptocurrencies to join the scheme.

The group amassed over 10 million members and accumulated over 100 billion Yuan, valued at approximately $14 billion.

A Chinese government spokesperson said Zhang’s extradition demonstrated the authorities’ determination to safeguard the rights and interests of citizens.

Meanwhile, the extradition follows a nearly four-year investigation by Chinese police initiated in November 2020. Interpol’s China Bureau issued a red notice in March 2021, leading to Zhang’s arrest in Thailand in July 2022.

Further, Zhang’s arrest and extradition resulted from a joint effort between China and Thailand under the “Fox Hunting Operation.” A Thai court approved Zhang’s extradition to China in May, making him the first criminal suspect extradited under the China-Thailand treaty since 1999.

China’s crypto relationship

This extradition action reflects China’s continued efforts to crack down on the digital asset industry.

Over the years, the country has consistently distanced itself from the industry. The authorities have enacted regulations restricting crypto trading and prohibiting financial institutions from dealing with digital assets.

However, some Chinese citizens still find ways to access the industry despite these strict regulations. A Chainalysis report pointed out that the country received over $75 billion in crypto between July 2022 and June 2023.

Meanwhile, the crypto community is beginning to speculate that China may be warming up to the industry thanks to several developments, including the approval of spot Bitcoin exchange-traded fund (ETF) products in Hong Kong.

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Bybit has removed China from the list of countries whose citizens are restricted from using its services.

CryptoSlate confirmed this development on June 5 via the exchange’s website and noted that the list still includes other countries such as the United States, the United Kingdom, Canada, Singapore, and Hong Kong.

It is unclear if Bybit has secured licensing to operate in China. However, market observers believe the move could attract millions of Chinese users to the platform.

Earlier today, Wu Blockchain reported that the crypto exchange was allowing Chinese users to register. The journalist added:

“Bybit’s competitors have essentially opened registration for Chinese users. However, Bybit’s move has also caused panic among internal employees.”

According to CoinMarketCap, Bybit is the second-largest crypto exchange by trading volume, processing over $4 billion worth of trades in the last 24 hours. Blockchain analytics firm Nansen’s exchange reserve dashboard shows that customers hold over $7 billion worth of assets on the platform.

As of press time, Bybit has not commented publicly on the development or responded to requests for comment.

China’s anti-crypto stance

Bybit’s decision to establish a presence in China is unexpected, given the country’s strict regulatory stance towards the crypto industry. China initially prohibited crypto transactions in 2013 and extended the ban to crypto mining activities in 2021.

This anti-crypto regulatory environment forced several crypto platforms, including Binance and HTX (formerly Huobi), to cease serving customers in mainland China after authorities barred overseas exchanges from providing services to mainland investors.

Despite the ban, reports suggest that crypto traders in China have found alternative ways to participate in the crypto market. A Chainalysis report ranked China as the third Asian country with the highest crypto activities, stating that Chinese crypto received transactions worth $86.4 billion between 2022 and 2023.

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News on regulation in China: Chinese commitment to the development of NFTs and decentralized applications (DApps) persists, despite the ban on cryptocurrency trading. 

The Chinese Ministry of Industry has announced its intention to draft strategic documents to promote the growth of NFTs and decentralized apps. Let’s see all the details below. 

China challenges regulation: NFT and DApp

As anticipated, China aims to promote the development of non-fungible tokens (NFTs) and decentralized applications (DApps), demonstrating a strong commitment to blockchain technology, despite the recent negative regulation on cryptocurrencies.

The Ministry of Industry and Information Technology announced in a document published on Tuesday its intention to develop strategic documents to outline the development direction of web3.

The central government has emphasized that attention will be focused on key sectors, such as governance and industry, with explicit encouragement to explore new business models, such as NFT and decentralized applications.

The goal is to accelerate application innovation and build a digital ecosystem for Web 3.0. These statements were made in response to questions from Johnny Ng, a member of the CPPCC National Committee, the country’s top political advisory body.

The ministry has also announced plans to launch pilot projects related to distributed digital identity, with the aim of exploring new approaches for authentication and management of web3 digital identity.

This new push from the central government towards the development of web3 follows the efforts of various local governments, which at the beginning of this year committed themselves to the development of the metaverse industry.

For example, the province of Sichuan announced in August its goal of growing the metaverse industry to reach a market size of 250 billion yuan (35.1 billion dollars) by 2025. 

China, despite the ban on trading cryptocurrencies since September 2021, has maintained local NFT trading, which however falls into a regulatory gray area.

China RealDID: the decentralized identification system that redefines data protection

At the beginning of this month, the state-backed Blockchain-based Service Network China introduced the China RealDID, a nationwide decentralized identification system, in collaboration with the research institute of the Chinese Ministry of Public Security.

According to a statement shared with The Block, BSN described China RealDID as an extension of Anicert’s Cyber Trusted Identity, emphasizing that the launch of the system represents a “bold step in protecting personal data”. 

Through this system, users have the possibility to register or access commercial websites using their DID addresses and private keys, offering an advanced level of security and privacy.

As anticipated, despite the ban on cryptocurrencies, China’s technological advancements in the field of blockchain are remarkable. 

These are highlighted mainly by the introduction of the decentralized identifier with real name in the context of the Web3 domain, as observed by BSN, the developer of the Chinese national blockchain infrastructure.

The latest progress of AI in China 

The Chinese artificial intelligence (AI) industry is growing, driven by companies seeking to increase productivity.

In 2018, Xinhua introduced the world’s first AI-based news anchor in the English language, Zhang Zhao, to reduce production costs and ensure continuous availability. 

Since then, generative artificial intelligence has recorded a significant increase, leading to the creation of translated podcasts, lip-syncing apps, and virtual influencers with a wide range of aspects. 

Another example is the virtual actress Lili Ziren, who has conquered the Chinese entertainment industry with her participation in the TV series “I Am Nobody”, produced by Tencent Animation and Comics and distributed on Youku. 

The extraordinary resemblance of Lili to a human artist has quickly attracted a growing fan base on all Chinese social media platforms.

In addition, the main technology giants in China, such as Alibaba, Baidu, and Tencent, have heavily invested in large-scale artificial intelligence models, expanding the scope of artificial intelligence in various sectors. 

The growing fascination for content generated by artificial intelligence is evident in online videos exploring the field of artificial intelligence and the emergence of digital avatars based on this technology in China.

Recent developments have seen the integration of artificial intelligence in the Chinese billion-dollar live streaming industry, allowing AI streamers to interact with users in real-time and even speak multiple languages. 

These digital clones are created with a single camera and five minutes of footage of the real person they emulate.

China, which has banned Bitcoin and mining since last year, has announced that it will launch its own Non-Fungible Token (NFT) industry by the end of the month. The new infrastructure supported and funded by the Chinese state is the Blockchain Service Network or BSN. 

China ambiguous: no to Bitcoin but yes to NFTs

The Blockchain Services Network or BSN reportedly plans to launch the Chinese state-funded infrastructure to support NFT distribution by the end of this month. 

Specifically, this is the BSN-Distributed Digital Certificate (BSN-DDC) which will offer application programming interfaces for enterprises or individuals so that they can build their own user portals or apps to manage NFTs. 

We are far from the world of decentralized Non-Fungible Tokens on public blockchains, precisely because in China, Bitcoin, Ethereum and cryptocurrencies are “illegal blockchains”. 

In this regard, He Yifan, CEO of Red Date Technology, which provides technical support to BSN explicitly said:

“NFTs have no legal problem in China, as long as they distance themselves from cryptocurrencies like Bitcoin.” 

How the Blockchain Service Network (BSN) works 

The Blockchain Service Network or BSN has already been a reality since 2018, backed by Chinese state-owned companies such as China Mobile, China UnionPay and State Information Centre, and has already “localised” more than 20 public blockchains since its debut. The BSN is a solution called open chain with permission. 

In the specific case of the BSN-DDC dedicated to NFTs, there are already 10 integrated blockchains, including the adapted version of Ethereum and Corda, plus national ones such as Fisco Bcos started by WeBank and backed by Tencent. 

In contrast to public blockchains that also use their own crypto to buy NFTs, such as the case of Ethereum (ETH), with the BSN only the Chinese yuan will be allowed, both for purchases and service fees.

In terms of costs, issuing an NFT on BSN-DDC can be really cheap, with a price like 0.05 yuan (0.7 cents). Again, Yifan stressed that it will only be possible to make a profit if 10 million NFTs are generated in a year.  

Digital yuan sets download records

China has its own way of approaching the crypto world by adopting an anti-cryptocurrency stance in 2021, issuing several bans on the use and purchase of Bitcoin and crypto, as well as a ban on mining activities. 

Yet, like other states around the world, it seems that China has since worked on its CBDC by launching the wallet earlier this month and year.

A few days ago, the wallet for e-CNY (the digital Yuan) posted record downloads, topping the app store charts for Apple and Xiaomi, despite still being limited to certain cities only. 

The digital yuan can already be used on other mobile payment apps, such as Alipay and WeChat Pay, while the dedicated app is a full-fledged official wallet that gives everyone certain benefits such as discounts and promotions. 

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