Huaxing Capital's Bold Bet on Web3: Transformation Dilemmas in the Post-Bao Fan Era

Author: Ada, Deep Tide TechFlow

Original title: An experiment with no way back, Huaxing Capital's bold bet on Web3

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

Just two months ago, the board approved a similarly sized fund to venture into the Web3 and cryptocurrency space. Such intensive actions have led outsiders to speculate that Huaxing is planning a deep transformation, possibly even a self-revolution.

In the landscape of investment banking in China, Huaxing has always been a unique presence.

It neither has the state-owned background of Zhongjin or Zhongxin, nor the century-long foundation of Goldman Sachs or Morgan Stanley. Its growth path has almost entirely coincided with the explosive rhythm of China's internet boom. Since its establishment in 2005, Huaxing has witnessed and orchestrated the merger of Didi and Kuaidi, the marriage of Meituan and Dianping, the integration of 58.com and Ganji... Behind almost every major merger that has shaped the industry landscape, Huaxing can be seen. Without that decade of wild growth in the internet sector, Huaxing might find it difficult to ascend to the throne of "king of mergers and acquisitions."

However, as the tide recedes and the internet economy transitions from an incremental era to a stock game, the anti-monopoly stick is raised high, and the soil on which Huaxing survives is undergoing fundamental changes.

This once-glorious boutique investment bank is facing unprecedented survival challenges.

Entering Web3: Is it the self-redemption of Huaxing, or the collective fate of traditional investment banks in the digital age?

The Dilemma of the King of Mergers and Acquisitions

In 2021, Huaxing Capital delivered an almost perfect report card: total revenue reached 2.504 billion yuan for the year. The net profit for the year also achieved a year-on-year growth of 56.5%, reaching 1.624 billion yuan. That year, it successively completed landmark projects such as the Hong Kong IPO of Ideal Automotive and the listing of Kuaishou Technology. In the annual report, Bao Fan excitedly wrote: "We are standing at the starting point of the next decade of the new economy."

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

In 2022, Huaxing Capital Holdings saw a decline in both revenue and net profit, with total operating income of 1.533 billion yuan, a year-on-year decrease of 8.36%; the annual loss was 564 million yuan, a year-on-year increase of 134.71%.

Behind all of this is the rapid cooling of the macro environment.

According to the "2022 China Mergers and Acquisitions Market Review and Outlook", the total amount of M&A transactions nationwide fell by 23.5% year-on-year, with a staggering decline of 41% in the TMT sector. For Huaxing, which relies on TMT acquisitions for its foundation, this is almost equivalent to pulling away the soil it depends on for survival.

However, the deeper crisis does not lie in the data, but in the patterns.

The rise of Huaxing coincided with the golden age of the Chinese internet, evolving from 0 to 1 and then to 100. It was a wild era: startups needed to rapidly grow and strengthen, giants were eager to acquire market segments, and capital was keen on storytelling. Huaxing happened to play the role of a "super matchmaker" in this capital frenzy. Bao Fan's personal charisma, network resources, and keen intuition about industry trends formed Huaxing's moat.

As long as the market is in an incremental cycle and mergers and acquisitions remain the preferred script for the capital market, Huaxing operates like a fish in water. Behind almost every major deal that changes the landscape, one can find their figure maneuvering through.

But once the environment reverses, the story takes a different turn. The market enters a phase of stock competition, and "strong alliances" gradually become a regulatory red line, causing the once invincible model to lose its stage.

This is the real dilemma for Huaxing: it is not a decline in business, but rather that the model it relied on for success has been abandoned by the times.

Centralized networking, closed information channels, and relationship-driven value creation seem out of place in a new world that emphasizes transparency, openness, and disintermediation.

Especially in the culture centered around Bao Fan, it is more difficult to make progress. Reuters quoted a person who knows Bao Fan as saying that Huaxing is still a one-man business, a key-person focus business model, which has become hard to sustain in the new era.

The Secret Web3 Layout

Huaxing Capital's exploration of Web3 is not a temporary decision.

In May 2018, Circle announced the completion of a $110 million Series E funding round. The list of investors was filled with names of top firms such as IDG, Breyer Capital, and Bitmain. Almost no one noticed that Huaxing Capital was also among them.

If not for Huaxing actively sending a congratulatory letter in June 2025, the outside world might hardly know that it had already 'entered' the stablecoin track. A closer look at Circle's prospectus shows that Huaxing is not listed as a major shareholder, which means its shareholding ratio is limited or it has already liquidated its holdings before the IPO.

Nevertheless, investing in Circle's Huaxing still brings a long-lost excitement to investors.

After successfully entering the "Circle Concept Stocks," Huaxing Capital's share price soared from 3 Hong Kong dollars to over 6 Hong Kong dollars, an increase of over 100%. For a company that has experienced long-term fluctuations downward after going public, this is undoubtedly a strong shot in the arm.

Huaxing can invest in Circle, stemming from Bao Fan's foresight years ago.

In 2015, it was the peak of Huaxing Capital. As the hottest investment bank in China's new economy sector, Huaxing was involved in nearly all significant mergers and financing of internet companies. However, at the height of its glory, Bao Fan unexpectedly made a statement: "In three years, we might not have food to eat."

That sentence became the starting point for Huaxing's transformation. Bao Fan understood very well that relying solely on consulting fees and commissions was too thin; a new growth engine had to be sought. Therefore, he chose to shift from being a "service provider" to a "participant," from a consultant to a shareholder.

In the investment landscape of Huaxing, Circle is not particularly eye-catching. During the same period, it invested in Meituan, JD Digits, Kuaishou, Li Auto, NIO, and Pop Mart... In contrast, an American company engaged in crypto payments seems somewhat "non-mainstream." Moreover, Lei Ming, who led this investment, later admitted that being able to invest in Circle involved an element of luck. Huaxing entered the scene relatively late and with a small share, making it hard to say that it truly made a significant profit.

In addition to Circle, Huaxing has also left multiple footprints in the crypto space: directly investing in Amber Group and Matrixport; acting as a financing advisor for Canaan Creative, Bitdeer, and HashKey. They even invited Frank Fu Kan, who has many years of experience in blockchain work and entrepreneurship, to serve as an independent non-executive director.

However, these efforts have not immediately translated into impressive performance. According to a report by 36Kr, Huaxing earns more from financing services in the crypto market rather than from excess returns on capital operations. The value of Huaxing in Circle's eyes exists more in the realm of imagination and market capitalization repair.

The Gamble After the Bao Fan Era

In 2024, Huaxing Capital will welcome a new helmsman.

After Bao Fan went missing, his wife Xu Yanqing gradually stepped into the spotlight, taking the helm of this boutique investment bank. Following the exit of former CEO Xie Yijing, Huaxing Capital formed a core leadership team consisting of Chairman Xu Yanqing, CEO Wang Lihang, and Executive Director Du Yongbo.

Xu Yanqing proposed the "Hua Xing 2.0" strategy: to reduce reliance on traditional internet businesses and bet on hard technology, Web3, and digital finance.

This shift is not a whim, but precisely aligned with the key points of the policy.

In May 2025, the Hong Kong Legislative Council just passed the "Stablecoin Regulation Draft"; a month later, the government released the "Digital Asset Development Policy Declaration 2.0". Almost at the same time, Huaxing announced that the board approved a budget of 100 million USD to officially enter the Web3 and cryptocurrency asset space.

This decision has made the outside world smell a familiar scent. In the past, Huaxing was good at hitting the right moments, helping Chinese internet companies outperform during the decade of brutal growth; now, it seems to want to replicate the success of that year in a new arena. However, this time it lacks the presence of Bao Fan.

In August, Hua Xing Capital signed a memorandum with YZi Labs, planning to invest 100 million USD in BNB assets, becoming the first Hong Kong listed company to incorporate BNB into its digital asset allocation. The market quickly provided a simple analogy: the "BNB Micro Strategy" in Hong Kong stocks.

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

First, we are developing fund-based products in collaboration with Huaxia Fund (Hong Kong) and other partners to promote the listing of BNB on compliant virtual asset exchanges in Hong Kong. Coincidentally, on September 3rd, the compliant trading platform OSL opened trading services for BNB to professional investors, becoming the first exchange in Hong Kong to support BNB trading.

Secondly, Huaxing Capital will establish a RWA fund with a scale of hundreds of millions of dollars with the assistance of YZi Labs, promoting the landing of BNB public chain stablecoin and RWA application scenarios in Hong Kong-listed companies.

Behind these actions, Huaxing is trying to leverage the momentum of the largest trading platform Binance to enter the ranks of core players in Web3.

On August 29, during the fifth anniversary celebration of BNB Chain, Xu Yanqing stated in a conversation with Ella Zhang, the head of YZi Labs: "Since Huaxing established a strategic partnership with YZi Labs, we have received a large number of inquiries from traditional financial institutions. They are no longer asking 'why do we need to allocate digital assets,' but are focusing on 'how to correctly allocate core assets like BNB that represent the future financial ecosystem.'"

She further emphasized: "Hua Xing should not only become a bridge connecting the Web2 and Web3 worlds, but also, through our expertise in investment banking services, asset management, and wealth management, continue to lead Hua Xing to become the most iconic investment bank in the Web3 era."

In summary, Huaxing's logic is very clear:

External logic: When traditional institutions want to enter the crypto market, direct investment often faces higher risks, while investing in Huaxing stocks can indirectly gain exposure to crypto assets.

Internal logic: The integration of Web3 and Web2 will inevitably give rise to new financing and acquisition demands, potentially replicating the story of the "Internet merger decade."

In other words, Huaxing wants to continue playing the role of the "first investment bank" that can influence the market landscape in the crypto world.

The vision is grand, but the constraints when implemented are exceptionally realistic.

The Dilemma of Transformation

As a boutique investment bank that started with TMT mergers and acquisitions, Huaxing's core advantage has always been its deep understanding of the Chinese internet industry and its founder resources.

In the world of traditional investment banking, the incentive mechanisms are clear: commission sharing, short-term performance, and achieving results as quickly as possible. Investment bank employees are typical "professional service providers" who complete transactions and charge fees.

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

First of all, the failure of the FA model is almost inevitable.

In the golden age of internet mergers and acquisitions, Huaxing became a "super matchmaker" relying on its network and information asymmetry: who is raising funds, who is selling, and how valuations are determined are often only known to a few investment banks. In the on-chain world, capital flows, governance voting, and protocol data are almost completely transparent, allowing anyone to track them in real time. Except for a few large exchanges or asset management institutions in Asia that do require FA assistance for financing, most project capital actions are more akin to "crowdfunding-style investments," and even derivative platforms like Hyperliquid do not need external financing at all from the start, making the bargaining and matchmaking advantages of investment banks no longer significant.

Therefore, to truly achieve excess returns, Huaxing Capital can only personally engage in investments.

"Being a FA is mainly about making friends and earning money through investments," a former FA practitioner once explored the crypto world with this mindset. After successfully making friends and starting to invest, he ended up losing his money.

The primary market of the crypto world is extremely perilous. To make good investments, one must have a deep understanding of the underlying logic of the crypto market and be able to connect with the best entrepreneurs to continuously empower them.

However, the cryptocurrency space is often filled with short-term narrative traps: once a project hits the right trend, its valuation may skyrocket in just a few months; but when the narrative fades, the market cap can be halved in an instant, and the team lacks a business model, relying solely on selling coins to survive, leading to a continuous decline in market value. Moreover, the current market has lost faith in altcoins, with funds mainly concentrated in leading assets like BTC, ETH, and SOL. Even the currently popular coin-stock linkage model may one day be proven false in the future.

For Huaxing, this means two layers of risk:

First, whether the investment vision is penetrating enough to see through narrative traps; second, reputation risk.

The speed of change in the crypto cycle far exceeds that of traditional markets; a protocol being hacked or a project running away can destroy market value within 48 hours. If Huaxing encounters a setback, it not only risks financial losses but may also lose the hard-earned reputation of being a "boutique investment bank."

Singapore's sovereign wealth fund Temasek not only lost about $275 million in FTX, but more seriously, as a state-backed investor, Temasek faced questioning from Parliament and was forced to admit that there were "significant lapses in due diligence," which severely damaged its reputation.

From this perspective, the best path for Huaxing Capital may not be to recreate a crypto version of the "King of Mergers and Acquisitions," but rather to turn towards being a major player in the secondary market. By strategically allocating core assets such as BTC, ETH, and BNB, and layering quantitative strategies and risk hedging, the aim is to pursue stable returns.

But this road is equally dangerous.

Trading means competing alongside countless professional quantitative funds, native crypto trading teams, and multinational market makers. Without profound technical capabilities, risk control systems, and on-chain data insights, it is nearly impossible to establish a true advantage solely based on the brand and connections of traditional investment banks.

Huaxing Capital is in an awkward position:

Being an FA, the information advantage is no longer; being a VC, narrative traps are everywhere; being in the secondary market, it also lacks the native genes.

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

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

Looking back at 2025, Huaxing's Web3 transformation resembles an experiment that was pushed onto the table. It was not a result of active choice, but rather gradually forced into a corner by the environment.

Twenty years ago, Huaxing rose to prominence by seizing the window of opportunity for the take-off of the Chinese internet. At that time, Bao Fan, with a challenger’s spirit, tore open the seams of old finance with the phrase "an investment bank that understands the internet."

Today's situation is different: Web3 brings not just the transfer of offline business to online, but a complete rewriting of financial logic: decentralization, permissionless, community governance—these concepts directly shake the intermediary status that investment banks rely on for survival.

The transformation of roles has made the issue more acute. Back then, Huaxing was a pioneer and could take on challenges with ease; today, Huaxing is a vested interest and wanting to go "all in" on a new track means letting go and betrayal. For an institution that has already been written into China's merger and acquisition history, such a choice is more brutal than it was twenty years ago.

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

But for Huaxing, there is no turning back.