Original author: Ada, TechFlow

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

Just two months ago, the board of directors approved a similar investment to expand into Web 3 and cryptocurrency. Such a rapid pace of activity has led to speculation that Huaxing is planning a profound transformation, perhaps even a revolution of its own.

In China's investment banking landscape, Huaxing has always been a special existence.

It lacks the state-owned capital of CICC and CITIC, nor the century-long legacy of Goldman Sachs and Morgan Stanley. Its growth path coincided almost entirely with the explosion of China's internet. Since its founding in 2005, Huaxing has witnessed and orchestrated the merger of Didi and Kuaidi, the alliance between Meituan and Dianping, the integration of 58.com and Ganji... Huaxing's hand can be seen behind nearly every industry-defining merger and acquisition. Without that decade of unbridled internet growth, Huaxing's ascension to the throne of "M&A King" might have been difficult.

However, when the tide recedes and the Internet economy moves from an incremental era to a stock game, and the anti-monopoly stick is raised high, the soil on which Huaxing depends for survival is undergoing fundamental changes.

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

Is entering Web 3 Huaxing’s self-salvation, or the collective fate of traditional investment banks in the digital age?

The Dilemma of the M&A King

In 2021, Huaxing Capital delivered a near-perfect report card: total revenue for the year reached 2.504 billion yuan. Net profit for the year also saw a 56.5% year-on-year increase, reaching 1.624 billion yuan. That year, the company completed landmark projects such as Li Auto's Hong Kong IPO and Kuaishou Technology's listing. 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' revenue and net profit both declined. The annual operating income was 1.533 billion yuan, a year-on-year decrease of 8.36%; the annual loss was 564 million yuan, a year-on-year decrease of 134.71%.

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

According to the "2022 China M&A Market Review and Outlook," total M&A transactions nationwide declined by 23.5% year-on-year, with the TMT sector experiencing a 41% decline. For Huaxing, a company built on TMT M&A, this represents a virtual loss of its lifeblood.

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

Huaxing's rise coincided with the golden age of China's internet, when it grew from 0 to 1 and then to 100. It was a wild era: startups needed to grow rapidly, giants were eager to acquire the market, and investors were keen on storytelling. Huaxing perfectly served as the "super matchmaker" in this capital frenzy. Bao Fan's personal charisma, connections, and keen intuition for industry trends formed Huaxing's defensive moat.

As long as the market is in a growth cycle and mergers and acquisitions remain the preferred strategy in the capital market, Huaxing thrives. They can be found behind almost every major, game-changing deal.

But once the environment reversed, the story took a different turn. The market entered a period of competition for existing stocks, and "strong alliances" gradually became a regulatory red line, and the once successful model lost its footing.

This is Huaxing’s real dilemma: it’s not that its business is declining, but that the model on which it relies for success has been abandoned by the times.

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

This is especially true within a culture centered around Bao Fan. Reuters quoted a person familiar with Bao Fan as saying that Huaxing still operates on a one-man, key-person focus, a business model that is no longer sustainable in the new era.

The Secret Web 3 Layout

Huaxing Capital’s exploration of Web 3 is not a sudden decision.

In May 2018, Circle announced the completion of a $110 million Series E funding round. The list of investors was packed with top-tier institutions like IDG, Breyer Capital, and Bitmain. Few noticed that Huaxing Capital was also among them.

If Huaxing hadn't proactively sent a congratulatory letter in June 2025, the outside world wouldn't have even known it had already entered the stablecoin market. A closer look at Circle's prospectus reveals that Huaxing isn't listed as a major shareholder, suggesting its holdings are limited or that it may have been liquidated before the IPO.

Despite this, Huaxing's investment in Circle still made investors feel long-lost excitement.

After successfully becoming a "Circle concept stock," China Renaissance's share price soared from HK$3 to over HK$6, a gain of over 100%. This was undoubtedly a shot in the arm for a company that had been experiencing a long period of volatile decline since its listing.

Huaxing’s ability to invest in Circle stems from Bao Fan’s foresight many years ago.

In 2015, Huaxing Capital reached its peak. As the most sought-after investment bank in China's new economy, it participated in nearly every major internet company merger and acquisition and financing round. However, at this peak of success, Bao Fan made a surprising prediction: "In three years, we might not be able to make a living."

That statement became the starting point for Huaxing's transformation. Bao Fan clearly understood that a model relying solely on consulting fees and commissions was too weak and that he needed to find a new engine for growth. So, he chose to shift from being a "service provider" to a "participant," from an advisor to a shareholder.

Within Huaxing's portfolio, Circle doesn't stand out. During the same period, it invested in Meituan, JD Digits, Kuaishou, Ideal, NIO, Pop Mart... By comparison, a US company focused on crypto payments seems somewhat "non-mainstream." Furthermore, Lei Ming, who led the investment, later admitted that his decision to invest in Circle was partly due to luck. Huaxing's late entry and small market share make it difficult to say they truly made a killing.

Besides Circle, Huaxing has also made numerous other forays into the crypto world: direct investments in Amber Group and Matrixport; and serving as a financing advisor to Canaan Inc., Bitdeer, and HashKey. It even appointed Frank Fu Kan, a veteran of blockchain industry and entrepreneurship, as an independent non-executive director.

However, these efforts didn't immediately translate into impressive results. According to a report by 36Kr, Huaxing's profits in the crypto market stemmed more from hard-earned financing services than from excessive returns from capital operations. Circle's value to Huaxing lay primarily in its potential for growth and market capitalization restoration.

The big gamble in the post-Bao Fan era

In 2024, Huaxing Capital welcomed a new helmsman.

After Bao Fan lost contact, his wife Xu Yanqing gradually stepped forward and took over the steering of this boutique investment bank. After former CEO Xie Yijing was eliminated, Huaxing Capital formed a leadership team consisting of Chairman Xu Yanqing, CEO Wang Lixing, and Executive Director Du Yongbo as the core.

Xu Yanqing took advantage of the situation and proposed the "Huaxing 2.0" strategy: reducing dependence on traditional Internet business and placing bets on hard technology, Web 3 and digital finance.

This shift is not a sudden impulse, but is precisely timed to coincide with the policy node.

In May 2025, the Hong Kong Legislative Council passed the Stablecoin Bill; a month later, the government released the Digital Asset Development Policy Statement 2.0. Almost simultaneously, Huaxing announced that its board of directors had approved a $100 million budget, officially entering the Web 3 and crypto asset space.

This decision struck a familiar chord with the outside world. In the past, Huaxing excelled at capitalizing on key milestones, helping Chinese internet companies outperform a decade of rapid growth. Now, it seems intent on replicating that success in a new arena. However, this time, Bao Fan is missing.

In August, Huaxing Capital signed a memorandum of understanding with YZi Labs, planning to invest US$100 million in BNB assets, becoming the first Hong Kong-listed company to include BNB in its digital asset allocation. The market quickly gave a popular analogy: the "BNB micro-strategy" in Hong Kong stocks .

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

First, they worked with China Asset Management (Hong Kong) and other partners to develop fund-based products and promote the listing of BNB on a regulated virtual asset exchange in Hong Kong. Coincidentally, on September 3rd, OSL, a regulated Hong Kong trading platform, 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 a scale of hundreds of millions of US dollars with the assistance of YZi Labs to promote the implementation of BNB public chain stablecoin and RWA application scenarios in Hong Kong listed companies.

Behind these actions, Huaxing is trying to leverage the potential of Binance, the largest trading platform, to become a core player in Web 3.

On August 29th, at the BNB Chain 5th Anniversary Celebration, Xu Yanqing spoke with Ella Zhang, Head of YZi Labs, stating, "Since Huaxing established its strategic partnership with YZi Labs, we've received a significant number of inquiries from traditional financial institutions. They're no longer asking why they need to allocate digital assets, but rather how to properly allocate core assets like BNB, which represent the future financial ecosystem."

She further emphasized: "Huaxing will not only serve as a bridge connecting the Web 2 and Web 3 worlds, but will also continue to lead Huaxing to become the most iconic investment bank in the Web 3 era through our professional capabilities in investment banking services, asset management, and wealth management."

To sum up, 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 Web 3 and Web 2 will inevitably give rise to new financing and M&A needs, which can replicate the story of "Ten Years of Internet M&A".

In other words, Huaxing wants to continue to play 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 implementing it are extremely real.

The dilemma of transformation

As a boutique investment bank founded on TMT mergers and acquisitions, Huaxing's core advantage has always been its deep understanding of China's internet industry and its founder resources.

In the world of traditional investment banking, the incentives are clear: commission sharing, short-term performance, and quick results. Investment bank employees are quintessential "professional service providers," completing deals and collecting fees.

For Huaxing Capital, fully entering the crypto market means facing a cruel reality: many traditional top capitals have failed in this emerging field.

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

During the golden age of internet mergers and acquisitions, Huaxing's success as a "super matchmaker" was due to its connections and information asymmetry: who was raising funds, who was selling, and what the valuations were, were often only known by a handful of investment banks. In the on-chain world, however, capital flows, governance votes, and protocol data are almost completely transparent and can be tracked in real time by anyone. Aside from a few large Asian exchanges or asset management institutions that do require FAs to assist with financing, most projects' capital operations are more like "pooled investments." Even derivatives platforms like Hyperliquid never required external financing from the beginning, making investment banks' bargaining and matchmaking advantages less significant.

Therefore, if Huaxing Capital wants to truly obtain excess returns, it can only invest personally.

"Being an FA is mainly about making friends and making money through investment." An FA practitioner once explored the crypto world with this mentality. After successfully making friends and starting to invest, he successfully lost all his money.

The primary market in the crypto world is extremely dangerous. To make good investments, you must have a deep understanding of the underlying logic of the crypto market and be able to establish connections with the best entrepreneurs and provide continuous empowerment.

However, the cryptocurrency world is often rife with short-term narrative traps: once a project hits a trend, its valuation may skyrocket within a few months; but once the narrative fades, its market capitalization plummets, and the team, lacking a business model, relies solely on selling tokens, leading to a continuous decline in market capitalization. Furthermore, the current market has lost faith in altcoins, with funds primarily concentrated in leading assets like BTC, ETH, and SOL. Even the currently popular cryptocurrency-stock linkage model may one day be disproven.

For Huaxing, this means two layers of risk:

One is whether the investment vision is strong enough to penetrate the narrative trap; the other is reputation risk.

The crypto market cycle shifts much faster than in traditional markets. A protocol hack or a project collapse can decimate market capitalization within 48 hours. If Huaxing were to stumble upon a compromise, it would not only suffer financial losses but also risk losing its hard-earned reputation as a "boutique investment bank."

Singapore's sovereign fund Temasek not only lost approximately US$275 million in FTX, but more seriously, as a state-owned investor, Temasek was questioned by Congress and forced to admit that "there were major omissions in due diligence", which dealt a heavy 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 rather to become a major secondary market player. By strategically allocating core assets like BTC, ETH, and BNB, combined with quantitative strategies and risk hedging, they can pursue steady returns.

But this road is equally dangerous.

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

Huaxing Capital is in an awkward position:

As an FA, you no longer have the information advantage; as a VC, you are faced with numerous narrative traps; and as a secondary investor, you lack the native genes.

This is also the dilemma faced by many traditional FA/VC in the crypto world. To gain a foothold in Web 3, not only capital investment is needed, but also a thorough cognitive reconstruction.

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

Looking back from 2025, Huaxing's Web 3 transformation seems more like an experiment that was forced onto the table. It wasn't a conscious choice, but rather a gradual push into a corner by the environment.

Twenty years ago, Huaxing rose to prominence by capitalizing on the takeoff window of China's internet sector. Back then, Bao Fan, with his unwavering ambition as a challenger, used his "investment bank that understands the internet" to break through the old financial system.

Today’s situation is different: Web 3 does not bring offline businesses online, but rather a complete rewriting of financial logic: decentralization, permissionlessness, and community governance. These concepts directly shake the intermediary status on which investment banks rely for their survival.

This shift in roles has made the issue more acute. Back then, Huaxing was a startup, able to embark on a light-footed venture. Now, with vested interests, going all-in on a new venture would mean abandoning and betraying itself. For an institution already etched in the annals of Chinese M&A, this choice is even more brutal than it was twenty years ago.

Globally, traditional financial institutions have rarely achieved true breakthroughs in the digital asset transition. Goldman Sachs was one of the earliest investment banks to test the waters, but to date, digital asset business accounts for a negligible portion of its revenue. The common dilemma facing this industry is: Can it revolutionize itself, or is it destined to be replaced by new breeds?

But for Huaxing, there is no turning back.