It’s no secret that China has a long and complicated history with cryptocurrency and blockchain technology, at times showing their love and hopefulness for the latter, while frequently taking actions to prohibit the use of the former.
While speaking at East Tech West, Edith Yeung, the head of 500 Startup’s China unit, spoke to CNBC about this complex relationship, detailing the division between the government’s views on blockchain and cryptocurrency.
China Has a Long History of Anti-Crypto Actions
China’s embattled relationship with cryptocurrency, which is underpinned by blockchain technology, first began in late-2013 and into early-2014 when the government took action to ban Chinese citizens from purchasing, trading, and using cryptocurrencies, including Bitcoin.
At the time, this ban was devastating for the cryptocurrency markets, which had garnered much of their global trading volume from the Chinese markets. The ban severely reduced the global trading volume and damaged Bitcoin’s price and led Chinese investors to turn to alternative means for buying and selling crypto.
Recently, in an effort to not miss out on the exponential profits that are potentially offered by the cryptocurrency markets, China’s citizens have turned to means including virtual private networks (VPNs) and peer-to-peer (P2P) transactions in order to bypass the government’s bans.
Some exchanges are even using frequently changing domains that investors can access in order to circumvent the government’s ban placed on the standard domain.
China Loves Blockchain, But Hates Cryptocurrency
When looking at China’s history with the cryptocurrency markets, it is clear that they have no love for the nascent and speculative markets that offer users significantly more privacy and power than is offered by fiat currencies.
Despite blockchain’s ties to cryptocurrencies, Yeung explained that the government is extremely interested in the technology, and fears falling behind other countries due to not utilizing and implementing blockchain tech.
Yeung cited the funding that multiple major Chinese cities are directing at Distributed Ledger Technologies, including the $72 million blockchain fund created by the Shenzhen government. Hangzhou also recently announced their plans to invest 10 billion yuan ($1.4 billion) in blockchain tech.
Furthermore, the head of China’s government, and likely one of the people who led the crusade against cryptocurrencies, President Xi Jinping, even ordered the use of blockchain technology in the development of a new, high-tech, city called the Xiongan New Area economic zone.
Although blockchain and crypto are closely related to one another, it is important to note that blockchain can offer societal benefits without the use of cryptocurrencies. Yueng explained some of the benefits blockchain can offer on its own, citing the verification of diamonds as one such use-case.
“I was looking at a user case where they were trying to certify diamonds. Diamonds come from one place and you pass it (on) … you wanna make sure that it’s real jewelry for us. I think there is a lot of really practical use cases the whole world can use blockchain for,” she explained.
In Yueng’s internet report, she also notes that some of China’s biggest companies are devoting serious resources to researching and implementing blockchain technologies, including internet giants Baidu, Alibaba, and Tencent, who have looked into using blockchain for everything ranging from online games to healthcare.
As China becomes more open to utilizing DLT and blockchain, it is possible that they may become more open to allowing their citizens to buy, sell, and hold cryptocurrencies under a strict regulatory framework.
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