The news that China-based Canaan Inc, the world’s second-biggest maker of bitcoin mining hardware, yesterday submitted a listing application for the Hong Kong stock exchange should have wider implications for both Hong Kong’s position as a corporate center for digital-asset businesses and also for the blockchain industry as a whole.
According to the listing prospectus published on Tuesday, Morgan Stanley, Deutsche Bank AG, Credit Suisse Group AG and CMB International Capital are joint sponsors of the listing, with Bloomberg reporting that Canaan hopes to raise about $1 billion with its IPO and hopes to be trading as soon as July.
Canaan, founded in 2013, has attempted to diversify in recent months, to both high-end R&D in the electronics industry and to artificial intelligence applications and this announcement follows the industry-wide shift from the murky capital-raising “initial coin offerings” world to one that is both open to mainstream institutional investment and is regulator-compliant.
Canaan has actually tried to gain a PRC-based IPO on two occasions. In 2016, its attempted listing on China’s yuan-based A-share market failed after regulators ruled Canaan had overvalued the deal. Last year Canaan again failed with a PRC listing application, this time on China’s start-up friendly National Equities Exchange and Quotations “New Third Board” market, after Beijing increased its clampdown on digital currencies and related initial coin offerings.
The Canaan listing will be the first Hong Kong IPO from the digital asset industry and will help position the city at the heart of the blockchain world. This week Hong Kong titan Cathay Pacific Airways also announced a foray into blockchain via a collaboration with Accenture that uses the technology for an Asia Miles rewards program app, while CryptoBLK, a Hong Kong-based tech company, says it helped HSBC deliver the world’s first “live trade finance transaction” using blockchain.
The trade, between HSBC, ING bank and agri-food trading giant Cargill, moved soybeans from Argentina to Malaysia, and was, said CryptoBLK, the first time a live transaction, that was an end-to-end trade between a buyer and a seller and their respective banks, “was completed on one shared digital application rather than multiple systems.”
Commenting on the transaction, HSBC cited a United Nations study to that said if all its Asia Pacific’s trade-related paperwork was into electronic form, it could slash the time it takes to export goods by up to 44% and cut costs by up to 31%.
The Canaan IPO news comes on the heels of the announcement that Bitmain, also from China and the biggest Bitcoin mining company in the world, has just invested $110 million into a Goldman Sachs-backed Circle project that aims to launch a fully-regulated US-dollar backed crypto-currency.
The core business of both Canaan and Bitmain is the manufacture of specialist ASIC computer chips designed for the power-hungry Bitcoin mining industry. According to data in Canaan’s IPO filing, the ASIC hardware market in China grew to 7.3 billion yuan (approximately $1.15 billion) last year from 50 million yuan in 2013 and will reach 28.6 billion yuan by 2020.
As crypto-mining increases, by volume and by scale of hardware, there is a shortage of these chips. Canaan will hope its Hong Kong IPO will allow it to scale up to meet demand.
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