Chinese
Cryptocurrency Crackdowns
Throughout
2017 and early 2018, the Chinese government took several steps to restrict its
citizens’ access to cryptocurrency, as well as the applications of any coins
already acquired. In September 2017, China banned the launch of new initial coin
offerings (ICOs) in the country, and later that same month, Chinese bitcoin
exchanges shut down all trading operations to
comply with government investigations into this new space.
By
January 2018, state regulators quietly announced a long-term strategy to remove
cryptocurrency from the Chinese economy altogether, promising to ban foreign platforms related to
cryptocurrency. Considering the substantial proportion of the world’s cryptocurrency
mining that takes place in China, such news brought considerable anxiety to
these markets at the time.
Newfound
Approval for Blockchain Technology
Nevertheless,
it seems as if the Chinese government’s animosity toward cryptocurrencies does
not extend to the other practical applications of blockchain technology. In
late May, Chinese President Xi Jinping publicly praised distributed ledger technology,
referring to it in a speech as a “breakthrough” technology with many
applications.
Citing
China’s role as a leading developer of scientific technologies, Xi urged the
development of blockchain technology in a number of diverse fields. In the
subsequent aftermath, the Chinese state television channel CCTV ran an hour-long glowing review of
blockchain technology, referring to it as “the second era of the Internet” with
a value “10 times that of the Internet.”
This may
seem strange to outside observers, given the aggressive stance China has taken
toward the popular currency-based applications of blockchain technology, but it
is important to note that the show also openly announced a break with the
decentralized model of cryptocurrencies. As long as the Chinese government is able
to keep new blockchain technologies on a firm leash, it seems as if its
approval of these technologies will rise up accordingly. Whether or not
centrally controlled applications of blockchains truly represent the
technology’s purpose and potential is another question.
Early
Chinese State Investment
Even
before this new state investment into blockchain technology, China was already
a leader in this field’s development. In 2017, Chinese-based companies filed a majority of all patents related to
blockchain development in the world. Not only was this an impressive feat of
scientific discovery, but it also represented a near-quadrupling of Chinese
blockchain patents from 2016 to 2017.
For
investors looking at China as a market that’s already expanding at a breakneck
pace, it should attract great interest that the Chinese Huobi Group has already
pledged an investment of $100 million
toward building a public blockchain. This publicly available technology is
intended as a platform for the company’s future operations, laying the
infrastructure to allow millions of potential customers to access functions
that rely on blockchains.
The
People’s Bank of China also recently announced a plan to incorporate
blockchain technology on a grand scale, using the platform’s ability to verify
transactions as a way to replace paper checking systems altogether. If
implemented successfully, such an ambitious plan will serve as a valuable case
study for similarly broad applications of blockchain technology around the
world.
The
Future of Chinese Blockchain Research
State-backed
support from a nation that already contributes a substantial amount of
blockchain technology could become a monumental development in this space, on
several levels. On one hand, of course, investors are sure to take notice of
the fact that blockchain-related startups in China are already working with
budgets in the hundreds of millions of dollars, providing a substantial
opportunity to make gains as this market expands. On the other hand, however,
projects that do not have direct opportunities for investment still can serve
as a valuable proof-of-concept. If China is able to successfully use blockchain
technology to place itself on the cutting edge of banking and other digital
technologies, other nations and transnational corporations will surely have to
follow suit.
Such
experiments from China can definitively prove to skeptics that blockchain
technology is able to account for projects that would require an immense amount
of accounting otherwise. A desire to keep up with China may keep blockchain
firms active on a global scale.
