Over the last two or three years, China’s relationship with blockchain technology and cryptocurrencies can be easily regarded as a love-hate one.
However, as of late, there have been numerous reports hinting at the incredible attention the Chinese government towards cryptocurrencies. In fact, there have been numerous reports of a cryptocurrency launched by the Chinese communist government.
Considering China’s economic power, its international prowess, and its immense population, there’s no wonder that such a cryptocurrency could very well surpass Ethereum and even Bitcoin in popularity.
Before we dive deeper into the subject and analyze all the signs that China is bullish on cryptocurrencies, we will discuss China’s past events related to crypto, to the country’s current stance regarding cryptocurrencies and blockchain, as well as previous developments regarding legislative decisions.
Past Legislative Decisions Regarding Cryptos
If you’ve been passionate about crypto for the last two years, you probably remember that one of China’s most controversial legislative decisions regarding cryptocurrencies was to ban ICOs and any activity if any entity is raising virtual currencies.
The Chinese government declared then that the selling and distribution of tokens is an illegal fundraising method and, hence, a form of financial fraud punishable by law. Things didn’t stop here, as the Chinese government also blocked all websites related to crypto trading and ICOs, including foreign platforms. Still, regulatory bodies have been more favorable.
Following these decisions, advertisements for cryptos were also removed from the mainstream media. Back in April 2018, China put a halt to hosted blockchain events as well. So, considering all these aggressive and extreme decisions that display a rather bad stance on blockchain technology and cryptocurrency, it’s surprising that China is, in fact, bullish on blockchain and cryptocurrency developments.
China’s Current Stance On Cryptocurrencies
According to People’s Bank of China (PBOC), cryptocurrency investments (at least uncontrolled ones) can harm the Chinese economy and potentially pose a risk for the Yuan.
In short, the government has made its stance on crypto very clear: it doesn’t want them, and will not tolerate them, especially if they are external and not entirely controlled by the ruling power of China.
Be that as it may, the PBOC also released various statements saying that the research and development of cryptocurrency and blockchain technology is a top priority for China. This means that China’s central bank acknowledges the fact that crypto will replace paper money inevitably and this requires some research in order to take the best possible decision.
Interestingly enough, it is said that the Chinese government has invested and backed up various local crypto projects, such as Xiong’An Global Blockchain Innovation Fund, which supports many blockchain startups. According to several sources, the government offered at least $3 billion to fund emerging blockchain projects.
President Xi Jinping has also made a public televised appearance and called blockchain a “breakthrough” technology.
Why China Might Need Its Own Cryptocurrency
Despite all the bans and the controversial attitude towards blockchains, the national cryptocurrency started to circulate in two Chinese cities (Shenzhen and Guiyang). The national cryptocurrency in China is far from being a secret, as Zhang Yifeng, the chief of science and technology at the Banknote Blockchain Technology Institute admitted on numerous occasions that China is working on it.
The PBOC needs a digital coin in order to bring all cryptocurrencies back under the state control. It’s worth noting that, before the ban, China actually had one of the largest trading volumes of all countries. Not only that, but China also has a big number of crypto enthusiasts and crypto miners, not to mention crypto mining farms.
Ether and Bitcoin (as well as other cryptos) are still used in China to conduct illegal transactions and money laundering operations. The Chinese government wants to introduce its own cryptocurrency to solve these problems and also to make miners switch to mining a government-backed cryptocurrency. With these moves, the Chinese government hopes to reinstate control over all financial operations within the country.
There’s still not much information whether the coin will be ChinaCoin or CryptoYuan, but one thing is for sure: China will join the ranks of Russia and Venezuela who both have the same types of financial aspirations.
One interesting point of view is related to what effect will this cryptocurrency have on the crypto market once it hits mainstream adoption in China. There are those who are afraid that this Chinese cryptocurrency will actually crash the Bitcoin, Ripple, and Ethereum-powered market.
Considering everything that’s been said, it’s safe to say that China is not truly bearish or bullish on cryptocurrencies. The government does indeed accept the inevitability of crypto dominance over other traditional payment systems, but it still wants to retain full control over all transactions within the country.
In fact, China is very bullish on blockchain development and the government seems to have a long-term plan that started with the banning of cryptocurrencies last year. China’s authority finance institutions have announced that cryptocurrency and blockchain development will be a top priority for 2018 and, so far, everything acted out accordingly.
Many crypto experts agree that China will either “break” the crypto market or lead the charge towards a new bull market. It’s important not to forget that China’s influence on the international cryptocurrency market is immense.