Bridging Cultural Gaps in 2021: Crypto in China and the US

The information and cultural gaps between China and the U.S. are profound. I’ve been fortunate to fully appreciate this firsthand as a native Chinese citizen living in Hangzhou working at a U.S.-based investment firm.

In crypto markets, information bifurcates across the Pacific Ocean, actionable information doesn’t travel across as quickly as data packets travel over fiber. While you may be familiar with the Western channels – Telegram, Twitter, Discord, Medium – there is an entirely separate universe of crypto that exists and operates in Chinese channels – on WeChat, Weibo, Bihu and others. But that’s just the tip of the spear. The lack of overlap between these two markets is further compounded by additional cultural, timezone and language barriers. 

This post is part of CoinDesk’s Year in Review 2020 – a collection of op-eds, essays and interviews about the year in crypto and beyond. Mable Jiang is a principal at Multicoin Capital, a thesis-driven investment firm that invests in cryptocurrencies, tokens and blockchain companies. Follow her on Twitter at @mable_jiang.

How information flows, how relationships and ties between parties differ, how varying social norms create friction and differing consumer behaviors all combine to form the unique and idiosyncratic market structures for crypto in the U.S. and China. 

As we look to the year ahead, the high demand of interpersonal trust, the preference of mobile user interface, the WeChat-oriented information flow and the “pragmatism” in the Chinese culture will continue to hold true. Yet, as more channels for cross-cultural communication come around, Chinese and American crypto operators should be able understand the nuances between these cultures and more effectively market their services in the other market.

Understanding trust

One of the most important differences I’ve observed between China and the U.S. is how market participants build and develop trust with each other. People in China prefer to trust someone they know or someone they can interact directly with, whereas people in the U.S. tend to trust brands. 

In our investment thesis for dForce (the China-based decentralized finance super network), I argued that one of its unforkable moats was its local business ties and distribution channels. Mindao Yang, dForce’s founder, is a well-respected influencer in the local community and was able to forge strong relationships with key players in the Chinese crypto ecosystem because of his prominent position. Having personal relationships with the local community gatekeepers, crypto operators and key distribution channels in China is an unquantifiable, yet undeniable, edge. 

Chinese users live by ‘not your keys, not your coins’ because of higher trust requirements embedded in Chinese culture.

superapps, like WeChat and Alipay, which allow customers to solve all their problems in one place without going anywhere else.

Despite the fact that crypto is a borderless phenomena, user behaviors are still largely shaped by the ingrained user behaviors from the Web 2.0 era. For example, Asian exchanges are more likely to become superapps that offer cross-product services. Binance is a great example of this; over the last two years it has aggressively “blitzscaled” by continuously expanding its business from basic spot and futures trading to the more sophisticated options trading, to new staking services, mining pools and fiat over-the-counter applications. Binance is attempting to offer every crypto financial service imaginable – all within a single app. 

Coinbase, for example, reflects Western business strategy, with separate business lines and products for Custody, Prime, Pro and Retail.

Understanding user preferences and locationization is still a strong differentiator. That won’t change in 2021. Entrepreneurs need localized strategies in China and the U.S. 

Understanding information flow

Platforms like Twitter, Discord, Telegram and Medium in the U.S. welcome permissionless, pseudonymous online participation and the (relatively) free flow of information across platforms. It’s no secret that the primary venue for crypto information exchange in the U.S. is Twitter: users openly comment and freely follow whomever they like. 

China couldn’t be more different. The primary venue is not Weibo (China’s version of Twitter), nor is it Bihu (a crypto-native discussion forum like Medium). Rather, it’s WeChat. 

WeChat is a superapp and its information flows are close-ended. This makes WeChat a microcosm of information that originates exclusively from within. Everything starts and finishes in WeChat groups, WeChat embedded hyperlinks and WeChat Moments. 

As a result, the hurdle to build a community is higher in China because everyone has to use WeChat and it’s not easy to form a large WeChat group. For example:

  • Groups are capped at 500 people
  • QR codes have an expiration date
  • When the group is larger than 200, people cannot join via the QR code and the group manager needs to manually pull people in

On Twitter anyone can easily unfollow someone else. In a WeChat group, especially in the ones that have fewer than 100 people, members face social pressure for “quitting” the group. Some influencers in China go so far as to monetize their “private domain traffic” by charging fees for entry to their groups, which gives its members a special sense of community (and creates a perceived cost for leaving). 

Yet, the closer binding relationship on WeChat creates a more level playing field among whales, institutions and retail participants. A “thought leader” in the U.S. with a few hundred thousand followers on Twitter does not necessarily follow back all his followers, and as a result he or she cannot see all of the feedback. This one-way relationship effectively draws a line between crypto influencers and professional institutions and retail players.

On WeChat, however, representatives of institutions and retail players commonly end up in the same group. This “flatter” setting essentially enables bi-directional communication between the professionals and retail investors. 

Projects trying to market in China or the U.S. have to understand these information flow differences. In China, media is controlled and influenced by contractual relationships. In the U.S., media is “earned.” As crypto grows in relevance, more communication channels will emerge and the structure of information flow will continue to fragment. 

Understanding pragmatism vs. idealism

BitMEX’s Arthur Hayes once joked about how good marketing to a Chinese audience could make any token look promising. His joke was not all in jest; it reflects a deeper reality of crypto capital markets. 

Despite the fact Vitalik received tremendous support in China during the early days of Ethereum, today ETH maximalism is on the decline in China relative to the U.S. This stands in contrast to Crypto Twitter, where ETH maximalists passionately promote Ethereum. 

The products and protocols they are building are becoming increasingly more local and more global simultaneously.