Polychain and Chinese Banks
Polychain and a Chinese Bank are Betting Millions on STO
October 9, 2019
Polychain and Chinese Banks
Polychain and a Chinese Bank are Betting Millions on STO
October 9, 2019

The Chinese Government is indirectly participating in a security token offering (STO). The Nervos Network STO kicks off on October 16, aiming to raise an undisclosed amount within two weeks through the CoinList platform. So far, Polychain Capital confirmed that it is going to contribute $5.7 million to the STO, in addition to previous investments.

Kevin Wang, the co-founder of the Nervos project, told that the Hong Kong-based China Merchants Bank International (CMBI), a wholly-owned subsidiary of China Merchants Bank, also committed to contributing an undisclosed amount to the public STO. CMBI is not directly owned for context by the government the way the Bank of China is. Instead, its top 10 shareholders include at least seven corporations that are partially or fully owned by the state.

With regards to the bank’s political context, the Wall Street Journal reported that diplomatic tensions over alleged sanctions violations raised the possibility that someday, the Chinese banks could be shut out of the dollar economy, as sanctioned Iranian banks already are. Possibly, this is part of the reason why the Chinese outlet Chain News reported CMBI was investing in Nervos to build an “open” platform and a “new investment bank.”

Likewise, CMBI could not be reached for comment. 

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Despite the fact that Wang could not specify what that bank’s plans might be, he told:

“CMBI is a strategic partner, both in terms of financial plans and other types of applications they want to utilize for the blockchain. … We want to make sure they can utilize the infrastructure.”

Kevin Wang

Wang said that his token project’s $28 million fundraise in 2018, which included CMBI and Sequoia China, was actually a private sale with contracts guaranteeing 14 percent of the initial token distribution in late 2019.

Meanwhile, the crypto exchange giant Huobi is partnering with the Nervos Foundation to create a decentralized finance (DeFi) platform that could provide easier capital flows between cryptocurrencies.

Wang said that the Nervos platform will be a neutral, “publicly owned” an infrastructure that supports “other blockchains that are more regulatory compliant.” Speaking of these various compatible blockchains scheduled for implementation after mainnet launch in Q4 2019, Wang added:

“They are basically gateways that real-world assets can flow into. Then they will also be running on top of … the bigger ecosystem of Nervos, so that assets can also flow into the permissionless side of the infrastructure and enjoy the wider ecosystem of services, like DeFi services.”

Kevin Wang

Joseph Eagan, the president of Polychain Capital, told that it’s too early to decide whether his hedge fund will run a node or mine cryptocurrency for the Nervos project. But, he added that this could turn out to be one of the fund’s most lucrative investments.

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Eagan said:

“It’s one of our highest conviction projects, not just in Asia but globally.”

Joseph Eagan

He added:

“I think the ability to create smart contracts similar to ethereum is very compelling. … From a technological perspective, Nervos and the underlying token offer something truly unique.”

Joseph Eagan

In fact, institutions are not the only players taking note of this STO. At least four established crypto mining pools participated in the most recent testnet competition before the STO, including F2Pool and Sparkpool, two of the largest mining pools in the ethereum community. Wang said this should motivate future node operators.

However, the bitcoin network expanded slowly and quietly, over several years before it attracted lucrative speculation. Even a few hundred nascent network participants would struggle to resist capture from nation-state actors, which calls the “public” aspect of the project into question.

On the other hand, CMBI is not the only bank aiming to tap into the crypto ecosystem. WEG Bank AG in Germany is exploring direct conduits to decentralized exchanges (DEXs), since two of its shareholders work with or partially own DEX startups. However, Binance, in addition to working on a DEX of its own, is also a shareholder in the upcoming Founders Bank in Malta.

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Eagan also said that it’s too soon to assume traditional institutions will become prominent users of the upcoming Nervos platform.

He added:

“It’s often one to two years later that developers really start to use those protocols. I still think we’re in ‘wait and see’ mode as to who the primary users will be.”

Joseph Eagan

Source: Coindesk, Wallstreet Journal, Nervos Talk, Medium.com


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