Chinese blockchain venture capitalist Li Xiaolai has announced that he is permanently ending all involvement in the blockchain and cryptocurrency sector. Writing on the Chinese microblogging site Weibo, the prominent investor, who is widely recognised as China’s most successful blockchain investor further revealed that he will take “several years off” to contemplate a career change.
Li’s Weibo post appearing in a screenshot below, when translated from Mandarin to English reads:
From this day on, Li Xiaolai personally will not invest in any projects (whether it is blockchain or early stage). So, if you see ‘Li Xiaolai’ associated with any project (I have been associated with countless projects without my knowledge, 99% is not an exaggeration), just ignore it. I plan to spend several years to contemplate on my career change. As for what I’m doing next, I’m not sure just yet.
While the decision came as a shock to the market, possible reasons for Li’s exit may include the sustained market downturn, continued anti-crypto hostility from the Chinese government and a vast number of blockchain-related scams that have made the space a reputational risk for him.
Since the beginning of the year, crypto markets have suffered an 80 percent correction, which has burnt a number of investors. On its own, that may not have been enough to force Li out of the market, but when coupled with the Chinese government’s increasingly stringent crackdown on cryptocurrencies and ICOs despite its pro-blockchain stance, the investment risk factors may have informed his decision.
Managing Reputational Risks and What Comes Next for Li
As Li also alluded to in his post, a substantial number of scams and fraudulent projects within the blockchain space have created a significant reputational risk for him. In July, Li was forced to resign from his post as managing partner at Hangzhou Xiong’An Blockchain Fund following comments made by fellow venture capitalist Chen Weixing accusing him of being a “fraud”.
In the murky and unregulated world of many overseas crypto markets, Li’s name has been repeatedly linked to many projects without his knowledge or approval, as ICO promoters seek to drum up publicity and investment sentiment by leveraging his profile within the space. Some even believe that Chinese regulators may have taken note of this and encouraged him to leave the space in order to help their anti-crypto efforts.
Despite Li’s announcement, BitFund still retains a substantial investment position in bitcoin and other cryptocurrencies estimated at over $1 billion. There is little indication that the company will liquidate its crypto holdings. Li himself has given away no hints as to what his next move is, but many expect him to lay low for some time so as to ensure the total removal of his name from any association with scam projects.