Continuing our theme of speaking with people in the world of finance and technology we asked insiders at ByteDance in Shanghai their views about blockchain technology. The results give some useful insight into one of the likely narratives of the next bull run.
In previous cycles narratives have ranged from Bitcoin being digital gold to NFTs being the cutting edge of the art scene. These topics pull new users into the space and with their added liquidity the value of the market begins to rise. The present decline in value we’ve seen in this bear market is due to low liquidity, or money moving away from crypto to different markets.
The question on many peoples’ minds is what the next narrative will be. What will draw people back into crypto after all of the bad press it’s received this year? To try and understand this we turned our focus to China to find out how tech companies there are embracing the new digital Yuan or e-RMB.
ByteDance is the company behind TikTok or Douyin in China. At present they’re working on Spring Festival gift packages for all of their major advertisers. Spring Festival is the largest celebration in China and consists of a 7-day holiday to celebrate the Chinese New Year.
One familiar feature of the festival is giving presents in small red packets, usually money. To capitalize on this year’s celebrations TikTok has developed a red packet gifting system for all of their main retail partners.
What makes e-commerce different in China this Spring Festival is the development of the e-RMB and the way that it’s been integrated into everyone’s lives. The biggest gifts usually come from the oldest relatives who are traditionally averse to technology. That won’t be the case this year thanks to China’s covid travel pass.
During their zero-covid approach, everyone had to test for covid daily and update their status within either WeChat or Alipay. Both apps also contain a digital wallet which the central government has used as the backbone for launching their own digital currency. Therefore almost everyone in China now has a smartphone and digital wallet.
ByteDance has been quick to capitalize on this fact by integrating the e-RMB within their own platform. Although the people we spoke to remained tight-lipped about possible plans to develop their own wallet, they have already fully integrated the existing systems of WeChat and Alipay into TikTok.
At present TikTok has access to over 650 million daily users, most of which live outside mainland China. Even if ByteDance shy away from developing their own wallet on the mainland it’s fairly obvious they’ll need some form of digital wallet for their users in the rest of the world.
People with first hand knowledge of the system explained the main benefit of e-RMB is its seamless integration, “Everything is natively digital and uses the same systems to talk with each other. Transactions are swiftly settled and credited to the merchant’s accounts almost immediately. Everyone loves it, it’s so simple even Grandma can use it.”
The difficulty facing the current system of e-commerce in the west is that it’s an ad-hoc collection of different intermediaries with different systems and clearing times. If one has a problem that can cascade through the chain leading to delays and inefficiencies.
TikTok already operates e-commerce systems throughout the world that integrate with a variety of different payment systems. However, China is the only market where the payment system is completely digital. Although the end user won’t really see it, the developers, bankers, and merchants are becoming increasingly convinced of the need for digital wallets in every major country.
The big takeaway from Spring Festival 2023 is likely to be more international companies pushing governments to embrace crypto payments. Although they got a taste for it in El Salvador, the market in China is huge and the cost savings and efficiencies will be hard for them to resist.
While the media will probably focus on negative crypto narratives, you can expect that large-scale retailers will be focused on how to integrate digital currencies into their operations outside China. The only question is whether we’ll see decentralized cryptocurrencies allowed to be part of this future or whether governments will try to follow China’s approach of using only Central Bank Digital Currencies.