Original Article Title: "An Irreversible Experiment, Huaxing Capital's Bold Move into Web3"

Original Article Author: Ada, Deep Tide TechFlow

In the midsummer of 2025, Huaxing Capital once again became the focus of the market's attention as it signed a memorandum of cooperation with YZi Labs (formerly Binance Labs), planning to invest $100 million heavily in the Binance platform's coin BNB.

Just two months ago, the board had just approved a fund of the same scale to venture into the Web3 and cryptocurrency field. Such intensive actions have led outsiders to speculate that Huaxing is planning a deep transformation, perhaps even a self-revolution.

In China's investment banking landscape, Huaxing has always been a unique presence.

It lacks the state-owned background of CICC and CSC Financial, as well as the centuries-old heritage of Goldman Sachs and Morgan Stanley. Its growth path has almost entirely followed the rhythm of China's internet explosion. Since its establishment in 2005, Huaxing has witnessed and orchestrated the mergers of Didi and Kuaidi, Meituan and Dianping, 58.com and Ganji... Behind almost every industry-shaping merger, one can see Huaxing's footprint. Without the brutal growth of the internet in those ten years, Huaxing might have found it difficult to ascend to the throne of the "M&A King."

However, as the tide recedes, as the internet economy transitions from an era of incremental growth to a game of existing resources, and as the anti-monopoly club is held high, the soil on which Huaxing relies for survival is undergoing fundamental changes.

This once infinitely glorious boutique investment bank is facing an unprecedented survival challenge.

Is venturing into Web3 Huaxing's self-redemption, or is it the collective destiny of traditional investment banks in the digital age?

The Dilemma of the M&A King

In 2021, Huaxing Capital delivered an almost perfect report card: with a total annual revenue of 25.04 billion RMB. Net profit for the year also achieved a 56.5% year-on-year growth, reaching 16.24 billion RMB. That year, it successively completed milestones such as the Ideal Auto Hong Kong IPO, Kuaishou Technology's listing, and more. In the annual report, Bao Fan excitedly wrote, "We are at the starting point of a new decade under the new economy."

But the peak often marks the beginning of a turning point.

In 2022, Huaxing Capital saw a double decline in revenue and net profit, with annual operating income at 15.33 billion RMB, an 8.36% year-on-year decrease, and a full-year loss of 564 million RMB, a 134.71% year-on-year decrease.

Behind all this is the sharp cooling of the overall environment.

According to the "2022 China M&A Market Review and Outlook," the total national M&A transaction volume for the year decreased by 23.5% year-on-year, with the TMT sector experiencing an even greater decline of 41%. For Huaxing, which relied on TMT M&A to establish itself, this was almost akin to having the very soil it relied on for survival pulled out from under it.

However, the deeper crisis lies not in the data, but in the model.

Huaxing's rise coincided with China's Internet golden age from 0 to 1 and then to 100. It was a wild era: startups needed to grow rapidly, giants were eager to acquire the race's top contenders, and capital was keen on storytelling. Huaxing happened to play the role of the "super matchmaker" in this capital frenzy. Bao Fan's personal charm, social network, sharp industry trend intuition, all formed Huaxing's moat.

As long as the market was in a growth cycle, as long as M&A remained the capital market's preferred script, Huaxing was in its element. Behind almost every transformative mega-deal, one could find their shadow orchestrating the negotiations.

However, once the environment reverses, the story takes a different turn. As the market enters a phase of competition for existing market share, "joining forces" gradually becomes a regulatory red line, and the previously advantageous model loses its stage.

This is truly Huaxing's dilemma: not a decline in business but having the successful model that underpinned its growth abandoned by the times.

A centralized social network, closed-off information channels, relationship-driven value creation. In a new world emphasizing transparency, openness, and disintermediation, these aspects seem out of place.

Especially within a culture centered around Bao Fan, the challenges are even more daunting. Reuters quoted an individual familiar with Bao Fan as saying that Huaxing remains a one-man business, a key-person-focused business model, which is increasingly unsustainable in the new era.

The Secretive Web3 Strategy

Huaxing Capital's exploration of Web3 was not a spur-of-the-moment decision.

In May 2018, Circle announced the completion of a $110 million Series E financing round. The investor list was filled with A-list institutions like IDG, Breyer Capital, Bitmain, and almost unnoticed, Huaxing Capital was also among them.

If not for Huaxing's proactive congratulatory letter in June 2025, the outside world would have been hard-pressed to know that it had already entered the stablecoin race. Upon closer examination of Circle's prospectus, Huaxing was not listed as a major shareholder, indicating that its shareholding was limited or that it had exited before the IPO.

However, despite this, Huaxing's investment in Circle has still managed to bring a long-lost excitement to investors.

After successfully being included in the "Circle Concept Stock," Huaxing Capital's stock price skyrocketed from HK$3 to over HK$6, a surge of over 100%. For a company that has experienced a long period of post-IPO ups and downs, this is undoubtedly a morale booster.

Huaxing's ability to invest in Circle stemmed from Bao Fan's foresight many years ago.

In 2015, at the peak of Huaxing Capital's success, as the most sought-after investment bank in China's new economy sector, Huaxing was involved in nearly all major internet company mergers and financing. However, at the most glorious moment, Bao Fan unexpectedly made a judgment that caught everyone off guard: "Three years later, we might have nothing to eat."

That statement marked the beginning of Huaxing's transformation. Bao Fan was well aware that relying solely on advisory fees and commissions was too fragile of a model, and a new growth engine needed to be found. Therefore, he chose to transition from a "service provider" to a "participant," from an advisor to a shareholder.

Within Huaxing's investment portfolio, Circle was not particularly prominent. During the same period, they invested in companies like Meituan, JD Digits, Kuaishou, Li Auto, NIO, and Pop Mart... In comparison, an American company focused on cryptocurrency payments seemed somewhat "offbeat." Moreover, Lei Ming, who led this investment, later admitted that luck played a part in being able to invest in Circle. Due to entering the game late and holding a small stake, it's hard to say they truly made significant profits.

In addition to Circle, Huaxing has also left its mark in the crypto circle: direct investments in Amber Group, Matrixport; acting as financing advisors for Jianan Technology, Bitdeer, HashKey. They even appointed Frank Fu Kan, who has years of experience in the blockchain industry and entrepreneurship, as an independent non-executive director.

However, these efforts did not immediately translate into remarkable performance. According to 36Kr's report, Huaxing made more money in the crypto market through the hard work of financing services rather than from excess returns on capital operations. The value of Circle to Huaxing lies more in the realm of imagination and market value restoration.

The High-Stakes Bet in the Post-Bao Fan Era

In 2024, Huaxing Capital welcomed a new helm.

After Bao Fan went missing, his wife, Xu Yanqing, gradually stepped into the spotlight, taking over the direction of this boutique investment bank. With former CEO Xie Yijing exiting, Huaxing Capital formed a core leadership team consisting of Chairwoman Xu Yanqing, CEO Wang Lixing, and Executive Director Du Yongbo.

Eric Xu proposed the "Huaxing 2.0" strategy: to reduce reliance on traditional Internet businesses and instead focus on cutting-edge technology, Web3, and digital finance.

This shift was not a sudden whim but a precise move aligned with policy.

In May 2025, the Hong Kong Legislative Council just passed the "Stablecoin Bill"; a month later, the government issued the "Digital Asset Development Policy Declaration 2.0." Almost simultaneously, Huaxing announced that its board of directors had approved a $100 million budget to officially enter the Web3 and crypto asset space.

This decision made outsiders smell a familiar scent. In the past, Huaxing excelled at hitting the pulse of the times, helping Chinese Internet companies outperform during a decade of rapid growth. Now, it seems to want to replicate its past success on a new track. However, this time, Bao Fan's figure is missing.

In August, Huaxing Capital signed a memorandum of understanding with YZi Labs, planning to allocate $100 million to BNB assets, becoming the first Hong Kong-listed company to include BNB in its digital asset allocation. The market quickly came up with a simple analogy: "The 'BNB MicroStrategy' of the Hong Kong stock market."

Buying coins is just the first step; in the future, Huaxing Capital also plans to continue empowering the BNB ecosystem in two aspects.

Firstly, they will develop fund products with Huaxia Fund (Hong Kong) and other partners to drive BNB listing on compliant virtual asset exchanges in Hong Kong. Perhaps by coincidence, on September 3rd, the Hong Kong compliant trading platform OSL opened BNB trading services to professional investors, becoming the first exchange in Hong Kong to support BNB trading.

Secondly, Huaxing Capital will establish an RWA fund with YZi Labs' assistance worth hundreds of millions of dollars to promote the listing of BNB's public chain stablecoin and RWA application scenarios on Hong Kong-listed companies.

Behind these moves, Huaxing is trying to leverage the momentum of the largest exchange platform, Binance, to become a core player in the Web3 ecosystem.

On August 29th, during the BNB Chain's fifth-anniversary celebration event, Eric Xu, in a conversation with YZi Labs' Ella Zhang, said: "Since Huaxing established a strategic partnership with YZi Labs, we have received numerous inquiries from traditional financial institutions. They are no longer asking 'why allocate digital assets' but are focusing on 'how to correctly allocate BNB-like core assets representing the future financial ecosystem.'"

She further emphasized: "Huaxing not only aims to be a bridge between the Web2 and Web3 worlds but also, through our professional capabilities in investment banking, asset management, and wealth management, continue to lead Huaxing to become the most iconic investment bank of the Web3 era."

In summary, Huaxing's logic is very clear:

· External Logic: When traditional institutions seek to enter the crypto market, direct investment often faces higher risks, while investing in Huaxing's stock can indirectly provide exposure to crypto assets.

· Internal Logic: The convergence of Web3 and Web2 will inevitably generate new financing and M&A demands, potentially replicating a story similar to the "decade of Internet M&A."

In other words, Huaxing aims to continue to play the role of the "top investment bank" that can influence the market dynamics in the crypto world.

The vision is grand, but the practical obstacles during implementation are exceptionally real.

The Dilemma of Transition

As a boutique investment bank that rose to prominence through TMT M&A, Huaxing's core advantage has always been its deep understanding of the Chinese internet industry and founder resources.

In the world of traditional investment banking, the incentive mechanism is clear: commission sharing, short-term performance, and quick results. Investment bank employees are typical "professional service providers" who complete transactions and collect fees.

For Huaxing Capital, fully entering the crypto market means facing a harsh reality: many traditional top-tier institutions have stumbled in this emerging field.

First and foremost, the failure of the Financial Advisory (FA) model is almost inevitable.

During the golden age of Internet M&A, Huaxing's ability to become a "super matchmaker" relied on its network and information asymmetry: who is fundraising, who is selling, and valuation were often only known to a few investment banks. However, in the on-chain world, fund flows, governance voting, and protocol data are almost entirely transparent, and anyone can track them in real-time. Except for a few large Asian exchanges or asset management institutions that do require FA assistance in fundraising, the capital movements of most projects are more akin to "potluck-style investment," with even platforms like Hyperliquid, a derivatives platform, not needing external funding from start to finish. The negotiation and matchmaking advantages of investment banks are no longer significant.

Therefore, to truly achieve excess returns, Huaxing Capital has no choice but to personally engage in investments.

“In the world of crypto, making friends through FA is to make money through investment.” Once, a former FA entered the crypto world with this mindset, successfully made friends, and started investing, only to end up losing all the money.

The primary market in the crypto world is extremely risky. To make successful investments, one must have a deep understanding of the underlying logic of the crypto market, be able to connect with the best entrepreneurs, and provide continuous empowerment.

However, the crypto space is often filled with short-term narrative traps: when a project catches a trend, its valuation can skyrocket within a few months. But once the narrative fades, the market cap plummets instantly, the team lacks a business model, and can only rely on selling tokens to survive, leading to a continuous decline in market value. Moreover, the current market no longer believes in meme coins, with funds mainly concentrated in top assets like BTC, ETH, and SOL. Even the currently popular coin-stock correlation model may be debunked in the future.

For Huaxing, this implies a dual risk:

First, whether the investment insight is penetrating enough to avoid the narrative trap; second, reputation risk.

The speed of crypto market cycles far exceeds that of traditional markets. A protocol being hacked or a project exit scamming can destroy its market cap within 48 hours. If Huaxing steps on a landmine, not only will its funds be damaged, but it may also lose the hard-earned reputation as a "boutique investment bank."

Temasek, Singapore's sovereign wealth fund, not only lost about $275 million in FTX but more significantly, as a state-backed investor, was subjected to parliamentary questioning due to this loss and was forced to admit "significant oversights in due diligence," resulting in a severe blow to its reputation.

From this perspective, the best path for Huaxing Capital may not be to recreate a crypto version of the "M&A King" but to transition into a large secondary market player. By strategically allocating core assets such as BTC, ETH, BNB, implementing quantitative strategies and risk hedging, it can pursue stable returns.

However, this path is equally perilous.

Trading means competing with numerous professional quant funds, native crypto trading teams, and multinational market makers. Without deep technical capabilities, risk management systems, and on-chain data insights, solely relying on the traditional investment bank's brand and network, it is almost impossible to establish a real advantage.

Huaxing Capital is currently in an awkward position:

Engaging in FA, it no longer has an information advantage; in VC, it is surrounded by narrative traps; in the secondary market, it lacks native genes.

This is also the dilemma faced by many traditional FAs/VCs in the crypto world. To establish a foothold in Web3, not only capital investment is required but also a thorough cognitive reconstruction.

It must answer a question: in this transparent, intermediation-free world, what is the value of Huaxing?

Looking back from 2025, Huaxing's Web3 transformation appears more like an experiment forced onto the stage. It was not a proactive choice but rather being gradually pushed into a corner by the environment.

Twenty years ago, Huaxing rose to prominence by seizing the opportunity of China's internet takeoff. Back then, Bofan carried a challenger's spirit, using the "investment bank that understands the internet" to tear open the gap in traditional finance.

Today's situation is different: Web3 has brought about not the migration of offline business to online, but a complete rewriting of financial logic: decentralization, permissionlessness, and community governance. These principles directly challenge the intermediary status on which investment banks rely for survival.

The shift in roles has sharpened the question. The Huaxing of the past was a startup that could enter the field lightly armored; today's Huaxing is already a vested interest. To go "all in" on a new track means sacrificing and betraying. For an institution already inscribed in China's M&A history, such a choice is more brutal than twenty years ago.

Looking globally, traditional financial institutions have rarely made significant breakthroughs in the digital asset transformation. Goldman Sachs was among the earliest investment banks to dip their toes in, but to this day, digital asset business remains negligible in its revenue. The common challenge in this industry is: can it undergo self-revolution, or is it destined to be replaced by a new species?

But for Huaxing, there is no turning back.

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