China has a twisted history with bitcoin, crypto and blockchain technology. During a recent interview with CNBC, an investor described how China has a "hate-love" relationship with crypts.
On the one hand, China loves cryptography because it plays a small but significant role in the Chinese economy. The world's largest producers of crypto-miners, including Bitmain, are based in China. Some of the world's largest cryptographic farms are in China. Numerous blockchain companies are located in technology centers such as Beijing, Shanghai, Guangzhou, Shenzhen and Hong Kong.
The China Internet Report found that 41% of the new Chinese companies that received funding in the first quarter of 2017 were linked to the blockchain. The largest Chinese companies, including Baidu, Alibaba and Tencent (the so-called "BAT" trio) are all actively building or investing in blockchain.
On the other hand, China has reason to hate bitcoins. The Chinese government likes to control what its citizens see, hear and consume. Critics argue that the value of the Chinese yuan has been manipulated for years to support China's economic prowess. While China has some control over bitcoin (through regulatory decisions), most of the bitcoin's power is decentralized.
In an interview with CNBC, Edith Yeung, head of the 500 Startup in China, explained the complex relationship between the Chinese government and the crypt. Yeung made the statements during East Tech West.
China has struggled with Crypto since 2013
Yeung has touched the complicated history of China with blockchain and crypt.
The country's battles with cryptography began in 2013. At the end of 2013, the Chinese government began to take action against Chinese citizens who exchanged, bought or used cryptocurrencies like bitcoin. On December 5, 2013, China announced that it prohibited Chinese banks from handling bitcoin transactions.
The ban had a devastating effect on the crypto markets at that time. In the early days of cryptography, a significant amount of trading volume came from China.
Here's how the Financial Times reported the ban at the time:
"China has banned banks from handling Bitcoin transactions, after the growing demand from Chinese investors has helped push a 5,000 percent appreciation in the much-publicized virtual currency this year."
The ban severely undermined the bitcoin brand image and questioned the bitcoin's ability to become a global currency.
In the fall of 2017, China had banned the trade in cryptocurrencies and ordinary consumers from the cryptocurrency trade. This sent the market into a brief recession, although it quickly recovered to a historic high before the end of the year, showing the world that the crypt did not need China's support to succeed.
China Love Blockchain But Hate Crypto?
Yeung believes that China's relations with blockchain and crypt can be summarized in this way:
China loves blockchain technology, but hates cryptocurrencies.
The Chinese government recognizes the potential of blockchain technology. Recognize that the blockchain can transform industries and create a more efficient world.
However, they also recognize how cryptocurrencies can be destabilizing. Cryptocurrencies are outside the control of centralized governments. China, which has become an economic power in part through currency manipulation, has reason to fear the emergence of cryptocurrencies.
Demonstrating the fact that China loves blockchain technology, Yeung cites government funding for blockchain projects.
As reported by CNBC:
"New funding has arrived from Shenzhen, after establishing a fund of 500 million ($ 71.9 million) of yuan for blockchain investment, Hangzhou also announced plans to invest 10 billion yuan in a blockchain fund. also the support of the central government of President Xi Jinping who ordered the use of blockchain technologies to create a smart city for the economic zone of Xiongan New Area ".
Yeung also mentioned a study of his organization that indicates that a large number of companies receiving funding were operating in the blockchain space:
"Blockchain start-ups are also recording investment growth, with 41% of new Chinese companies receiving loans in the first quarter of 2017 linked to the blockchain."
What are the prospects for China, Blockchain and Crypto?
Going forward, Yeung expects the Chinese government to continue to express interest in blockchain technology. Reportedly, the Chinese government sees a special potential in corporate uses for blockchain technology.
Yeung also mentioned health care, logistics, identity management and digital asset monitoring as other industries that can benefit from the blockchain.
Meanwhile, the major Chinese companies are actively exploring blockchain technology. For example, Baidu, Alibaba and Tencent are exploring blockchain technology in different ways. Alibaba has partnered with the city of Changzhou in August 2017 to launch the first blockchain technology platform in China in the health sector, for example.
However, it seems unlikely that China will embrace cryptocurrencies in the near future. As Yeung continues to stress, China loves blockchain technology but hates cryptocurrencies. It remains to be seen if China can embrace one but not the other.