Web3 Inside and Outside the Walls: The Triple Impact on Chinese Entrepreneurs and Solutions

Author: Hu Tao, ChianCatcher

As the cryptocurrency industry becomes increasingly mainstream, Chinese entrepreneurs seem to be drifting further away from the center stage.

Once upon a time, projects founded by Chinese entrepreneurs already held half of the industry’s landscape, including well-known cryptocurrency exchanges such as Binance, OKX, Bybit, Bitget, Gate, HTX, Bitmart, and others—all founded by Chinese. The same is true in mining: projects like Bitmain, Canaan, and SparkPool occupy important positions in the industry. Their commonality is that most were established around 2017-2018 or even earlier.

Although Zhao Changpeng, Xu Mingxing, Wu Jihan, and Sun Yuchen are still actively engaged at the forefront of the industry, since the DeFi Summer of 2020, a general consensus has gradually formed: the visibility and influence of the new generation of Chinese entrepreneurs in the global crypto industry have declined, and so far, no leaders have emerged to stand shoulder to shoulder with the previous generation of industry figures. Under this gap, what has the Chinese entrepreneurial ecosystem experienced? Where do future opportunities lie?

Regulatory and Geopolitical Reshaping: The First Impact of Ecosystem Disruption

The most undeniable factor in the past five years has been the dramatic change in regulatory and geopolitical environments.

Starting in 2021, China significantly increased its regulation of cryptocurrency-related activities, swiftly cutting off scenes like trading and mining that were previously scattered in gray areas. During these years, almost any trending concept was targeted by regulators—ranging from ICOs, NFTs, and digital collectibles to recent topics like payments and real-world assets—undoubtedly limiting the inflow and support of high-quality resources into the Chinese crypto ecosystem.

These crackdowns not only accelerated the migration of mining and exchange businesses overseas but also, more critically, caused Chinese entrepreneurs to lose a native market with network effects, high talent density, and capital concentration, forcing them to develop in unfamiliar overseas environments.

In the early crypto ecosystem, many explosive growth projects by Chinese entrepreneurs rapidly accumulated users through Chinese internet community mobilization mechanisms: WeChat group fission, KOL networks, media matrices, offline meetups… These channels once formed one of the most efficient narratives dissemination systems in crypto. However, regulatory policy changes rendered this system largely ineffective.

Consequently, industry power has rapidly shifted towards Europe and America—compliance-led regulation, influx of institutional capital, and maturing regulatory frameworks are beginning to shape an industry order vastly different from 2017–2018. New narratives, new regulatory patterns, and new capital structures naturally favor English-speaking markets and compliance-oriented entrepreneurial teams. For example, prediction markets, which have some gambling characteristics, are difficult to develop in Chinese markets with strict gambling regulations.

In this environment, the new generation of Chinese entrepreneurs find it harder to gain “default trust” from global media, regulators, capital, and users, compared to their Western counterparts, requiring more trial-and-error investment in marketing and compliance.

Capital Preference Shift: The Second Impact of Ecosystem Disruption

If the institutional barriers caused by regulation and geopolitics are the first impact, then the “structural preference shift” from the capital market side further exacerbates the marginalization trend of Chinese entrepreneurs in the new cycle.

In today’s industry environment, without strong VC funding and resource support, projects are at a disadvantage in user acquisition, token listing, and narrative building. Chinese entrepreneurs are already at a funding disadvantage.

Due to the poor overall performance of altcoins and significantly reduced investment returns, Chinese-backed VCs have drastically cut back or even ceased investments in the past 2–3 years. The options for financing and exit paths for Chinese entrepreneurs are heavily constrained. Facing Western-dominated VCs, Chinese projects struggle to gain favor due to language and cultural differences, leading to a decline in both the amount and number of funding received over recent years.

Number and funding share of mainland Chinese projects in the industry Source: RootData

Since the beginning of this year, the crypto industry has seen a wave of IPOs and mergers and acquisitions, with companies like Circle and Gemini successfully listing on U.S. stock exchanges, and Coinbase, Ripple frequently acquiring others. This has greatly boosted the confidence of entrepreneurs and VCs, but these are mostly unrelated to Chinese projects. In fact, Western projects are enjoying the institutional dividends of crypto mainstreaming.

From the perspective of mainstream capital, Western projects have natural advantages in compliance, cultural recognition, and exit strategies. Chinese projects, unless they possess exceptional team composition and technical background, find it difficult to attract Western capital.

Dislocation of Capability Structure and Industry Maturity: The Third Impact of Ecosystem Disruption

Over the past decade, the main theme of the crypto industry has been infrastructure and tooling. Although new concepts like DeFi, NFTs, gaming, and inscriptions have emerged, most have not become mainstream projects.

In an earlier interview with ChainCatcher, Jason Kam, founder of Folius Ventures, stated that over the past 5 to 10 years, Web3 development has been about laying foundations. The more important aspects are product categories and states—this is a decade focused on ecosystems, infrastructure, tools, and building consensus. In other words, it’s a decade of B2B products.

Europe and America have highly skilled engineers across three generations—old, middle, and young—adept at building B2B ecosystems. In contrast, the Asia-Pacific region mainly comprises engineers born in the 80s and 90s, whose career paths have been shaped by China’s B2C industry boom starting around 2005. Their engineering experience is rooted in B2C and applications, which are misaligned with the overall blockchain development trajectory, making it difficult for them to excel in public chains and infrastructure.

“If Asia-Pacific entrepreneurs compete on the same level as Western entrepreneurs in the To C space, I believe they have no disadvantages and may even have advantages—namely, their rich product experience and aggressive market capture strategies.”

Although Chinese entrepreneurs have demonstrated this in the more Web2-oriented exchange sector, the brief success of Stepn on-chain consumer products confirms their talent in C-end products. However, the overall market explosion for consumer-grade products has yet to arrive, closely related to the maturity of industry infrastructure. The market has not yet reached the “comfort zone” for Chinese entrepreneurs.

Entrepreneurs from Multicultural Backgrounds Are Becoming Industry Leaders

Strictly speaking, Chinese entrepreneurs are not new representatives in recent years. For example, Jeff Yan, founder of Hyperliquid, is of Chinese descent—his parents are Chinese immigrants, and he was born and raised in Palo Alto, California. He attended Harvard University, majoring in mathematics and computer science. After graduation, Jeff joined high-frequency trading giant Hudson River Trading as a quantitative trader. In 2022, Jeff founded Hyperliquid, which, with its “small and refined,” VC-free, user-driven growth approach, has become one of the fastest-growing giants in recent crypto years.

Although Hyperliquid is one of the most successful projects in this cycle with Chinese bloodline involvement, it is hard to see it as a continuation of Chinese entrepreneurial influence, because Jeff is rarely active within the Chinese ecosystem and mostly projects Western values and ideas, never using Chinese language publicly. Jeff and Hyperliquid’s rise highlight a key fact: in the new cycle, Chinese heritage can still generate global influence, but only if integrated into mainstream cultural systems, not relying solely on traditional Chinese entrepreneurial paths. Relying on a single cultural system limits one to regional dominance rather than global success.

In fact, many leading Chinese projects in this cycle’s industry have founders with multicultural backgrounds, often having studied in Europe or America during university—examples include Sahara founder Sean Ren, Kaito founder Yu Hu, BuidlPad founder Erick Zhang, among others. Long-term experience in Europe and America plays a significant role in their development.

Indeed, entrepreneurs with multicultural backgrounds are more favored in the crypto industry. For example, Ethereum founder, Solana founder, and Binance founder Zhao Changpeng all immigrated from China and Russia to North America during childhood. The collision of different political systems and cultures enabled these entrepreneurs to recognize early the value of blockchain in empowering personal sovereignty, leading to rapid action. They prioritize cultural inclusiveness in team building, resource integration, and daily operations, which ultimately makes it easier to attract users from diverse cultural backgrounds.

The borderless nature of crypto, combined with the regulatory and利益诉求 of various countries, will continue to influence the development trend of the industry for a long time. Chinese entrepreneurs face increasing challenges amid US-China conflicts and the mainstreaming of crypto. However, as recent skepticism about gambling tendencies, nihilism, and the falsification of many project concepts grows, the development trajectory of Chinese entrepreneurs may no longer be the most critical industry issue. The real focus should be: when speculative growth and narrative bubbles fade, who can sustain investment in the long-term value of decentralized technologies and redefine the industry direction through genuine products and verifiable innovation?

The core competitiveness of future industry patterns will depend more on whether founding teams possess cross-cultural collaboration skills, long-term technological commitment, and an understanding of regulatory uncertainties and organizational resilience. Regardless of cultural or national background, those who can sustain efforts in these dimensions are likely to be the true beneficiaries of the next cycle. In other words, success in the crypto industry has never depended on “where they come from,” but rather on “what they can accomplish.”