China’s aversion towards cryptocurrencies is nothing new to everyone involved in the industry. The country used to be and still is, to some extent, one of the largest jurisdictions in terms of traded crypto volume.
China is still at the top of the crypto mining volume in the whole world. Almost every major city in the Mainland has some kind of large crypto farm belonging to a substantial investor.
However, trading cryptocurrencies in China has been strictly forbidden for a while now, and ICOs are simply not worth even mentioning.
The CCP (Chinese Communist Party) has a very serious aversion towards anything that can’t be properly tracked. The internal affairs and policies of the Chinese regime is a bit different than what the West is familiar with, therefore these laws are quite “understandable” locally.
However, the country has suffered quite a lot of criticism from the blockchain community due to such prohibitions, especially because of how lucrative it is to run such a business there.
Despite this criticism and displayed aversion in the past though, China seems to be at the forefront of blockchain development. Not necessarily cryptocurrencies, but things such as Distributed Ledger Technology, cybersecurity, database composition and various other aspects of the blockchain simply cannot be denied.
Why cryptocurrencies were banned in the first place
Mainland China has quite a lot of archaic laws instated in the country. Some of them come from afar as the last dynasty that was ruling the country, while other more “modern” laws were added during the leadership of Chairman Mao. The Chinese Communist Party is the continuation of that regime, therefore nothing much has changed.
However, due to the development of most of the world, China allowed some capitalistic ideals to slip through its firewalls of regulations, which is why we have places like Guangzhou, Shanghai, Shenzhen and Hong Kong as the centers of Eastern commerce.
Due to slightly more open access to the Chinese markets, local laws dictated that monitoring was supposed to be a bit more “hands-on” and everything that had to do with cryptocurrencies were not in support of that idea.
This became even more apparent when Chinese Mainlanders started to spend their fortunes in the South-East. This was mostly the cause of how many gambling games in Australia were being played by Chinese nationals by illegally laundered funds.
The sheer amount of funds (billions of dollars) that were being funneled outside of the country meant that the evaluation of the Yuan would start going down significantly. This is due to the massive sell-off of billions of Yuan for foreign currencies. Although a weak Yuan was the ideal target for the CCP to maintain its exporting deals, an extremely weak Yuan wasn’t necessarily the case.
Therefore, all of the laundered funds that Chinese nationals would take outside of the country through cryptocurrencies needed to be somehow stopped, thus the ban on ICOs, crypto exchanges and crypto trading in general. Soon the ban may even touch crypto mining as well.
Why will China be a blockchain center?
Due to so many regulations it was very hard to believe that China would ever direct its gaze to the blockchain technology ever again, but October 25th was a very positive surprise when the leader of the CCP, Xi Jinping announced during a politburo meeting that the country needs to accelerate its focus on this very important technology.
There was no mention of lifting the bans that are already in place. The only cryptocurrency that can potentially dream of a deregulated Chinese crypto market is the CBDC (Chines Bank Digital Currency) which is being developed as a direct counter to Facebook’s Libra.
In fact, it could be deduced that the focus on blockchain technology could be the product of the CBDC as it will need comprehensive systems to funnel through the Chinese economy. Several large commercial banks have already signed an agreement to receive a large quantity of the currencies which will be emitted once the project is launched alongside several large Chinese tech companies.
All of this indicates China’s focus on spreading the CBDC across as many avenues abroad as well. One tool for which is their new Belt and Road Initiative. The advantage of using the CBDC abroad is faster transactions and more cost-effective ones at that.
It’s likely that the use of blockchain will only consider things such as Distributed Ledger Technology and cybersecurity. Other than that, it could be applied to things such as surveillance cameras and databases.