Rumors were spread on Thursday within the Chinese digital community of STEPN Chain that the firm is being forced to exit mainland China. STEPN is a popular “move-to-earn” platform built on Solana and Binance Smart Chain, founded by two Chinese emigrants now based in Australia.
The rumor was confirmed a few minutes after midnight, early on Friday morning. STEPN announced it will clear all accounts based in mainland China on July 15, stating that the decision was due to local compliance reasons. STEPN encourages users who are planning to be based in mainland China long-term to dispose of their property on the platform before then. Details are to be revealed gradually in the following days via email, social media or other channels.
The announcement soon caused panic selling across the market. When Pandaily introduced STEPN in April, the floor price of a “sneaker” on the platform was almost 13 SOL, but the price has dropped to just 8 SOL today. If the price drop of SOL is also considered, the cost to join the game is almost one-fourth of that in April. The price of its utility coin, GST, has also dropped over 30% in the past 24 hours, occurring mostly after the announcement was published. A similar thing also happened on the Binance Smart Chain (BSC). Compared to Solana, STEPN on BSC is known for its higher entry price and faster return rate. Market FOMO used to push the price of BSC to its highest level, and now with the mood of panic incited by STEPN’s withdrawal from mainland China and other negative developments related to this project and the overall crypto market, pessimism has spread widely across the sector.
In the announcement, STEPN did not reveal any specific details regarding its decision, although various rumors have emerged. One is that the decision was because STEPN is connected to user’s GPS data. In 2020, the Chinese government put Cybersecurity Review Measures into effect, which specifies that the operators of “Critical Information Infrastructure” (CII) are required to go through national security reviews when purchasing network products and services. GPS related information is part of CII. However, STEPN may not have followed related regulations and its Hangzhou-based engineering was investigated last night. Another statement is that the decision is totally team-based. The team has seen the potential risks of continuing to provide services to mainland Chinese users and thus decided to end services in the market before its local user base has grown too big. If this second theory is true, it would also harm the reputation of the project, as such a centralized decision without informing the community is clearly against the collectivist spirit of Web3.
After the decision was announced, Jerry, the founder of STEPN, said that mainland Chinese users currently comprise around 5% of the platform’s total user base, implying that the firm’s withdrawal from this market will not have drastic impacts on its overall business. Based on STEPN’s official Twitter account, its daily active users surpassed 500,000 on May 6 – up from 300,000 on April 18. However, since each user might have more than one “sneaker” on hold, the percentage of digital properties that belong to mainland Chinese users is still unknown. The key stabilization of a to-earn project is its constantly and continuously growing user base. When user growth cannot catch up with the new sneakers minted, a death spiral might happen, which once happened to Axie Infinity and might also deliver a deadly blow to this project.
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During previous AMAs, founding team members have said they still hold a few key cards in their hands to keep the project stable. It is not difficult to achieve success in a bull market, but it will be interesting to see how the project fares in more bearish times.