The Ministry of Science and Technology in China earlier in February approved the establishment of a blockchain research center, the National Blockchain Technology Innovation Centre, Chinese Daily reported. The Center is proposed to be based in Beijing. It will be managed by the Beijing Academy of Blockchain and Edge Computing (BABEC), backed by the Beijing municipal government. Microchip Research Institute will lead the construction of the Center. This is in collaboration with top domestic universities, research institutes and industry backbone enterprises.
Chinese Daily’s report noted that the Blockchain National Innovation Center “will carry out research and industrialization of key blockchain technologies, gather international leading talents, form an innovation network linking global resources, and provide services for improving my country’s technological innovation capabilities in the blockchain field and achieving high-level technological self-reliance and self-improvement.” It will also focus on developing blockchain-related technologies and their industrial applications. Also, it will explore major use cases related to the Chinese economy and personal livelihoods.
A report by Coingeek quoted an official of the Ministry of Science and Technology saying, “[t]he institute will make every effort to overcome key core technologies in the blockchain field, accelerate industrialization, cultivate high-level talents, and build a national blockchain strategic technology force.”
“With the start of the construction work, the national blockchain innovation center will focus on the basic theory of blockchain, key technologies of software and hardware, basic platforms and verification networks, and common platforms and services,” the official added.
China’s ban on crypto
China launching Blockchain Innovation Centre interests many followers. Notwithstanding China’s ban on crypto, the government has demonstrated substantial support for developments bordering on blockchain technology. Chinese President Xi Jinping, in 2019, stated blockchain’s “…important role in the next round of technological innovation and industrial transformation.” He then called for more efforts to foster development in the sector.
Following this statement, a significant number of tech companies and investors in China showed more interest in the blockchain space. By July 2022, blockchain companies registered with the Cyberspace Administration of China (CAC) increased to 1,821.
Late January this year, Bitcoin.com reported Hong Kong-based Red Date Technology’s launch of a new project to implement both stablecoins and central bank digital currencies (CBDCs) in cross-border payments. The goal is “to allow businesses from different countries to transact and settle in different regulated digital currencies,” explained its Universal Digital Payments Network (UDPN) whitepaper. UDPN is similar to the Society for Worldwide Interbank Financial Telecommunication (SWIFT).
Related: What is Cryptocurrency?
Prospects for the crypto market
With these developments, China’s anti-crypto stance notwithstanding, there may be hope for the crypto market in the country.
Early this February, a former adviser to the People’s Bank of China (PBOC), Huang Yiping called on the Chinese government to reevaluate its cryptocurrency ban. He warned that a permanent ban on crypto and its related assets could result in missed opportunities in technologies like blockchain. Yiping considers that these technologies are “very valuable” to regulated financial systems. He believes that China should reconsider whether the ban is “sustainable in the long run.”
In September 2021, China announced extreme restrictions on Bitcoin (BTC) mining and crypto trading. It imposed the ban in phases, until it put a total stop to all crypto transactions. Worldcoin.org explained that “the ban targeted three areas of dealing with digital assets: Bitcoin mining, Crypto trading and transactions, Employment in the crypto sector.” The Chinese government’s reasons for banning crypto include(d) “consumer protection, no legal backing, capital flight, Yuan devaluation, environmental concerns, control over CBDCs and metaverse projects.”
Whether the ban has made any difference considering these reasons, remains a subject of debate.
Could the crypto ban be lifted soon?
With China launching Blockchain Innovation Centre, one can’t help but wonder if China could lift the current crypto ban in the country.
Bloomberg’s Muyao Shen thinks “President Xi Jinping’s administration has taken other market-friendly steps … like easing up on tech giants and boosting the property sector. Given the prevalence of pivots, could crypto policy shift as well? Some see it as a distinct possibility.
“Hong Kong in the past few months has prioritized the creation of a virtual-asset hub, all under Beijing’s watchful gaze. There’s even been chatter about the possibility of a connect program, like in stocks, that would allow Chinese to access crypto via Hong Kong,” Shen opined.
One can only predict the moves of regulators and policymakers concerning the industry. For a country such as China that took the industry by surprise in 2021, it is harder to predict what might come next. But the trends suggest that the government’s conservative approach may be to enable them to formulate a viable framework for the crypto market. If that turns out to be the case, and it favors the industry stakeholders, including crypto firms and investors, then it is for their best interests.
Credit: Jude Ayua
Jude, a writer and lawyer, is Associate, Crypto Regulation at Crypto Asset Buyer (CAB).