The Chinese government has a challenging relationship with blockchain, to say the least. Rebecca Campbell from Yahoo Finance states that “While [China] doesn’t believe its citizens should trade crypto, it does see value in the technology.” She also notes that “China was one of the first jurisdictions to implement a blanket ban on the trading of any cryptocurrencies — while still hosting some of the world’s largest crypto mining operations.”
China’s government didn’t warm up to cryptocurrencies right from the outset, but the circumstances are different today. Given Facebook’s new proposal for a digital blockchain currency called the Libra project, Beijing has accelerated the release date of its own cryptocurrency. As stated in Forbes, China’s central bank will introduce its very own state-backed cryptocurrency that will only be given to seven institutions in its initial phase.
The introduction of Digital Currency/Electronic Payments (DC/EP) responds to market needs. In a country where the People’s Bank of China (PBOC) just devalued its currency again, the leading class is looking for a less volatile currency, and cryptocurrencies now appear to be a safer choice. Furthermore, Chinese investors are not as resilient as their Western counterparts when it comes to the use of blockchain because the Chinese government is proposing “strong centralization and state control” over the new currency. In light of these favorable circumstances, luxury brands are warming up to cryptocurrencies.
It should be noted that fashion was one of the first industries to embrace crypto. As an industry that’s always attentive to trends and adept at foreseeing their future impact, the fashion world latched onto blockchain ahead of most industries. In January 2018, during Ukraine’s fashion week (known as Kiev Fashion Days), the country hosted the first Blockchain Fashion Conference, and Forbes recently noted that cryptocurrencies have already been transforming the apparel industry by promoting accountability and transparency. With the rise of socially conscious consumption, luxury buyers are demanding sustainability and supply chain visibility, and blockchain has become a convenient tool for revolutionizing that whole area of the fashion industry.
Technologies like track-and-trace and new inventory management systems are advancing dramatic changes in fashion, and fraud, counterfeit products, and questionable ethical practices are beginning to be eliminated thanks to blockchain technology. The science “develops a physical-digital link between goods and their digital identities on a blockchain” says Forbes. In other words, we can identify the products through a cryptographic seal or serial number that is connected to the individual product’s “digital twin.”
According to Kryptomoney, fashion designer Martine Jarlgaard has created “a digital token for every item of clothing she creates,” recording the full pedigree of the product from its origin to the retail outlet. This way, consumers can scan a QR code or NFC-enabled label and access the full information connected to her products. Adopting such practices develops value, builds customer trust, and strengthens traceability and transparency along the supply chain.
Vanguard Chinese labels are, as expected, leading this blockchain innovation revolution. In October 2016, during Shanghai Fashion Week, Babyghost — a brand led by Qiaoran Huang and Joshua Hupper — presented a fashion collection equipped with blockchain-enabled Near-Field Communication (NFC) chips and an anti-counterfeiting smartphone app called VeChain. According to BraveNewCoin, VeChain was developed by BitSE, a Shanghai-based blockchain startup that was founded by former IBM, Louis Vuitton, and Alibaba employees. Market Mogul’s Susanna Koelblin identifies VeChain as “a cloud product management solution integrated with blockchain technology that puts unique IDs on the blockchain and can verify if an item is genuine or not.”
In addition to improving the supply chain and combating counterfeit goods, blockchain technology is also revolutionizing the way we shop online or transfer money through our accounts. Now, various e-commerce websites, like Cyankart.com, which has become India’s first fashion portal to accept crypto as payment and China-based Bitfash, which offers products from Zara, Mr.Porter, and Forever 21 in exchange for Bitcoins, are opening their stores to cryptocurrencies. In fact, Footwear News reports that over 100,000 merchants worldwide accept Bitcoins, while Luxury Society mentions that wealthy consumers can shop on BitDials, BitLuxuria, and CryptoEmporium where they can pay in Bitcoins for “high-end luxury and fashion goods such as Lamborghinis, Bentleys, luxury watches, jewelry, high fashion, and various highly exclusive products and goods.” Furthermore, Bitcoin sales offer full privacy, as Luxury Society points out that The White Company lets customers acquire products anonymously by paying for them in Bitcoins and having the merchandise delivered discreetly anywhere in the world.
The idea of exclusivity also forms a strong link between the luxury industry and cryptocurrencies. Bitcoins and luxury goods are both rare commodities of increasing value, so HNWI (high net worth individuals) naturally gravitate toward them. Because of this, high-end designers are celebrating the connection between the two industries with limited-edition collections and unique designs, such as the Hublot’s Big Bang Watch ‘Meca-10 P2P’commemorating the 10th anniversary of Bitcoin.
Luxury customers and retailers have serious cybersecurity concerns, and criminal activity in the industry is still widespread. Fortunately, cryptocurrencies and blockchain technologies have the potential to fix most fraud issues while also bringing strategic advantages to luxury businesses. But brands operating in China already lead in the blockchain revolution since they operate in a market where strong centralization and state control over DC/EP lowers scam risks and ensure safer processes. Only time will tell if Western businesses can catch up and take advantage of these new technologies in China’s growing luxury market.