China’s Dichotomy Between Cryptocurrency And Blockchain
On Friday, December 27, 2019, Chinese regulators issued a joint regulatory warning on the rise of virtual currency trading activity in the country. The Beijing Local Financial Supervision Bureau, the People's Bank of China Business Management Department, the Beijing Banking and Insurance Regulatory Bureau, and the Beijing Securities Regulatory Bureau noted that the uptick in activity is the result of the promotion of blockchain technology.
Indeed, on October 25, Chinese President Xi Jinping issued a statement for Chinese companies to ‘seize the opportunity’ offered by blockchain technology. The markets reacted with a surge in the price of bitcoin and an increase in internet searches for the term ‘blockchain’ on WeChat. The positivity on blockchain coming from China’s leader is not new as he has in the past referred to blockchain as ten times the importance of the discovery of the Internet.
The approach of being tough on virtual currency trading platforms while encouraging blockchain technology might seem at first to be complicated - particularly if public platforms such as Bitcoin or Ethereum are used that has a native token or cryptocurrency used as an essential part of the ‘blockchain’ or distributed ledger technology. Of course, for China, with the imminent release of a Central Bank Digital Currency, and its wish to maintain control over the types of digital or cryptocurrencies traded similarly to the way it has controlled the spread and use of the Internet, a policy coming down hard on cryptocurrency trading platforms makes sense.
Many in the United States have noted the focus should not be on cryptocurrencies, but rather blockchain technology. Indeed, the cryptocurrency and blockchain community seems to swing like a pendulum. When Bitcoin goes up, it’s all about the cryptocurrency and the focus on blockchain gets blurred. When Bitcoin goes down, the industry and developers are quick to note that finally, there can be a focus on the real gem in all of this technology - a distributed ledger technology that will fundamentally change the way people, processes, and organizations operate.
Indeed, a recent Forbes article noted how China’s approach to Blockchain was ‘winning’ and notes the U.S. should pay attention. The U.S. has similarly started to pay attention, more as the result of Project Libra, that forced Congress to pay attention to both cryptocurrency and blockchain at the same time. While many Members of Congress became quickly adept at some of the finer distinctions in the marketplace, cryptocurrency and blockchain still seem to be words quickly conflated, where an increase in blockchain is the same as an increase in cryptocurrency, and so the U.S. runs a much higher risk than China in stopping cryptocurrency trading and also significantly impacting the development of blockchain technology in the country.