SHANGHAI / HONG KONG (Reuters) – The bitcoin craze has increased fundraising by Chinese companies looking to expand their cryptocurrency operations or enter the booming sector.
From large listed companies accessing public markets to smaller players raising funds from venture capitalists, a jump in cryptocurrency prices and signs of increasing acceptance of technology by leading institutions have fueled the market boom.
Chinese bitcoin mining machine maker Ebang International Holdings, which debuted at Nasdaq in June, conducted two fundraising rounds in February alone, raising $ 170 million, even after a previous offer in November.
Newcomer Code Chain New Continent Ltd, a Chinese waste recycling company, raised $ 25 million in February through a stock placement to finance a bitcoin mining onslaught.
In private markets, “competition is hot and full of sharp elbows,” said Jehan Chu, managing partner at Hong Kong-based blockchain venture capital firm Kenetic Capital. “Each round of good quality funding has an excess of applications within a week of being announced.”
The market flourished despite complicated official attitudes towards cryptocurrencies in China.
Cryptocurrency exchanges are banned and mining frowned upon, but there is strong official support for the development of blockchain technology, which underpins cryptocurrencies like bitcoin, but is also instrumental in new innovations in areas such as commercial finance, supply chain management and anti-counterfeiting .
This has contributed to the emergence of attractive crypto projects in China, investors say, although many companies still list and raise money abroad.
Ebang plans to use its new capital to expand its own cryptocurrency mining, open cryptocurrency exchanges in Singapore and Canada and launch a Robinhood-style platform for bitcoin trading.
“Ebang’s growth story is very attractive to institutional investors … fundraising by all industry players is getting busier thanks to the bitcoin bull,” said Guo Yi, COO at Univest Securities, who underwrote the deals and helped raise money for several other Chinese Crypto Players.
Canaan Inc, another Chinese manufacturer of bitcoin mining machines listed on Nasdaq, is also expanding into mining, where powerful computers are used to verify bitcoin transactions and compete for a bitcoin reward.
Bitcoin, the world’s largest cryptocurrency, has increased by more than 300% in value since the fourth quarter of last year.
“Bitcoin prices present us with a unique opportunity to establish mining operations,” said David Feng, co-CEO of the newly arrived Code Chain, who ordered 10,000 bitcoin mining machines.
“EUPHORIC ATMOSPHERE”
The Chinese race comes with Coinbase, the largest cryptocurrency exchange in the United States, filed an order last month for a listing on Nasdaq. Regulatory approval would represent a historic victory for cryptocurrency advocates who seek conventional endorsement.
“Everyone can feel this atmosphere of euphoria in the market, and Coinbase’s listing would set the mood even higher,” said Jiang Changhao, co-founder and chief technology officer of Cobo, a cryptography custodian and provider of wallet services.
Cobo plans to launch a new round of venture capital financing this month to finance international expansion, targeting tens of millions of dollars because, Jiang said, “the market is bullish and our business is growing very, very quickly.”
Chu, from Kenetic Capital, said official support for blockchain and the use of technology in major initiatives by giants like Ping An and Ant Financial have been a factor in the number of high-quality blockchain and crypto projects in China.
But the recent price hike “poured napalm” into competition in the sector, he said.
Still, the entry of some Chinese companies into the cryptographic space raised the eyebrows of investors.
Last month, short sellers Hindenburg Research and Culper Research claimed that Chinese blockchain company SOS Ltd made false claims about its cryptocurrency business, allegations that SOS said were “distorted, misleading and unfounded”.
Guo of Univest Securities said the market has zero tolerance for cheating, but there is nothing inappropriate about the fact that Chinese companies are entering the bitcoin movement.
“If people don’t point to Elon Musk (Tesla’s founder) for endorsing bitcoin, what is wrong with Chinese companies adopting it?”
Reporting by Samuel Shen and Alun John; edition by Richard Pullin