China's Ever-Evolving Blockchain Landscape
Eden Dhaliwal, Global Managing Director at Conflux Network
Over the last few years, blockchain has emerged as a national priority in both the public and private sectors in China where they have even received increasing support from both local and provincial governmental bodies. This may come as a surprise after the People’s Bank of China (PBoC) took a hardline stance against cryptocurrency, declaring it would block access to all domestic and foreign exchanges, as well as initial coin offering (ICO) sites, last year.
The PBoC’s official statement said it would “adopt monitoring measures such as interviews, inspections, and bans on the monitored entities involved in virtual currency activities to resolve related risks in a timely manner.” Many individuals involved in the cryptocurrency industry in China took the statement to be a de facto ban on both crypto and blockchain. However, since then PBoC’s approach has developed in ways that show China is actually embracing blockchain technology rather than opposing it.
In fact, since that original announcement from the PBoC, the bank has been working on a fully backed digital currency, and China has invested heavily in blockchain applications and services.
Although not spoken about frequently in Western media, China has indeed had long history in the short lifespan of crypto and blockchain:
- In 2014, national exploration of the technology and digital currencies began when the PBoC formed a study group to research the practicality of issuing digital currencies and the related technological, operational and legal issues that would result.
- Chinese banks began exploring the use of blockchain technology within various segments in 2016.
- The Bay Area Trade Finance Blockchain Platform, initiated by the PBoC, launched in 2018 and has since seen thirty-eight banks join the platform.
- Also in 2018, the Shenzhen Municipal Tax Bureau introduced blockchain e-invoicing and has since issued more than 18 million blockchain e-invoices.
Flash forward to October 2019, when President Xi Jinping acknowledged blockchain as a core technology, bringing the cutting-edge concept to wider attention and encouraging local and provincial bodies to support Chinese blockchain-based projects.
Since then, the talk surrounding China launching its own central bank digital currency (CBDC) has only gotten stronger, as the government of China is eager to dominate the digital commerce landscape and make the economy future-ready. Additionally, the PBoC recently launched the first trials of its state-run digital currency, which marks a milestone on the path towards the first electronic payment system derived by a major central bank.
When it comes to an overall investment outlook for cryptocurrency, China is highly pragmatic and experimental in their approach. This runs counter to how many banks and governments view crypto as some sort of Wild West landscape of decentralization and lax regulation. However, this dose of pragmatism should be a good thing, as an objective-oriented philosophy is centered around what will deliver immediate, top notch results and in turn benefit the future of Chinese business.
China’s blockchain research and implementation over the past few years has made it clear that they’re not playing catch up with the Western world, but rather exploring thoughtful, measured ways to deploy a new sort of digital infrastructure for their economy. The main use-cases for blockchain technology will seek to accomplish three things: encourage data sharing, make businesses more efficient, and establish better credit systems in various sectors. We have actually seen this in effect with provincial governments endorsing blockchain projects like Conflux Network with the ultimate goal of working together to launch projects that enhance administrative and societal processes.
Since the central government has deemed blockchain technology a top priority, we can expect this rapidly growing technology to drive ample growth in China's market and beyond. Just last month, the city of Shenzhen issued 10 million yuan worth of digital currency to 50,000 randomly selected residents who applied. While the digital yuan is not “cryptocurrency” per se, these experiments make it clear that China is on the cutting edge of the industry and will present many opportunities in the future.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.