Several Amazon insiders told PingWest recently that various blockchain projects with unclear entanglements in virtual currency serve as the revenue pillars for Amazon Cloud Services (AWS) in China. Amazon China is apparently using a well-designed system to hide these projects, which are strictly prohibited by the Chinese government, under the guise of AWS.
During a lecture in March 2021, Elaine Chang, President of Amazon China, announced that the strategy of AWS in the country is driven by domestic customers, global companies’ China business and Chinese companies’ overseas business. However, 70% of AWS China’s overall revenue last year came from the third group, half of which was revenue brought about by blockchain businesses.
A regional account manager mentioned that the revenue of AWS China last year was 15 billion yuan ($2.1 billion), but considering that ByteDance spent more than $800 million last year, this figure may not be exact. ByteDance had been cooperating with Alibaba Cloud in international business before, but was forced to turn to AWS and Oracle after a US investigation.
The reason behind the inconsistency is China’s strict ban on cryptocurrency. As early as 2017, the central bank and other seven ministries issued a document prohibiting all forms of token issuance and financing activities. In May 2021, China began to crack down on Bitcoin mining and trading. Four months later, the People’s Bank of China and other departments issued a document clarifying the illegality of virtual currency-related business, and banning virtual currency exchanges providing services to Chinese residents.
Prohibited matters include the business connection between cloud servers and mining. However, according to statements of several people familiar with the matter, AWS has designed a sophisticated system in the Chinese blockchain market involving virtual currency, in an attempt to avoid risks.
In July this year, a social media user claimed that he had opened a virtual overseas account on AWS to operate his Ethereum, and immediately received a phone call from a project manager of AWS China, who said that he could provide technical support and offered access to a crypto exchange.
Another customer who also planned to purchase AWS services in the second half of this year said, “In the communication with project managers of AWS China, they indicated the possibility of introducing some technicians and insiders of crypto exchanges in an informal way.”
An AWS China employee revealed that its Chinese blockchain business was operated by teams in the country during the initial stage, and when the business becomes relatively large, customers will be transferred to other departments such as Amazon FinSpace.
The Amazon FinSpace team does not actually belong to the management category of AWS China. Because a large number of customers are involved in business that is not allowed in China, the labor contracts of personnel in this team are not signed with AWS China, but with departments in Singapore.
Amazon FinSpace is defined as a team sent to China by AWS’s Singapore company to avoid violating the local policies. Singapore, a country with a more loosely regulated environment and many Chinese residents and businesses, is becoming a bunker for AWS China to develop its blockchain business.