In its glory days, China dominated the cryptocurrency trading and mining industries. More than three-quarters of the world’s mining hashpower was in China; an eye-popping 95 percent of all BTC trading took place in the country.
All of that changed in 2017 when the Chinese government set a sweeping set of bans in motion. Suddenly, Chinese cryptocurrency exchanges, miners, and holders were sent into a wave of confusion as the Chinese government banned ICOs, followed by domestic cryptocurrency exchanges.
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Despite the Chinese government’s harsh attitude toward cryptocurrency, the Chinese blockchain industry appears to be thriving. HackerNoon reported that on June 4 of this year, Chinese Central Television broadcast an hour-long special segment on the blockchain industry in China that featured important industry figures as well as government regulators.
Over the course of the segment, blockchain was said to be “10 times more [valuable] than the internet,” and was described by President Xi Jinping as being part of a wave of technological revolution that also includes artificial intelligence, quantum computing, the internet of things, and mobile communication.
Now, the Chinese government is seeking ways to regulate the blockchain industry that it has so lovingly nurtured. Will the regulations successfully protect the industry and its users, or will they stifle industry growth?
Technological Innovation in Blockchain is Strong in China
Desmond Marshall, Managing Director of The Floor, told Finance Magnates earlier this year that indeed, despite the Chinese government’s bearishness toward crypto, the blockchain industry is stronger than it ever has been.
“China has had quite a big boom in the tech sector… where people are looking very strongly into blockchain technology,” he explained. “Of course, the popularity of Bitcoin helped in terms of people understanding what blockchain is. In terms of technology, China is actually very welcoming in terms of how these things are being applied.”
1/ Chinese court confirms Bitcoin protected by law. Shenzhen Court of International Arbitration ruled a case involving cryptos. Inside the verdict: CN law does not forbid owning & transferring bitcoin, which should be protected by law bc its property nature and economic value.
— cnLedger (@cnLedger) October 26, 2018
Some Believe that Regulations Arent’ Unreasonable–But they Will Place a New Financial Burden on the Industry
CEO of DropChain Billy Chan thinks that the regulations may not necessarily be a bad thing for the industry. “It’s not fair to say the government is stifling blockchain. Instead, they’re trying to hold people accountable” he said to TechNode, adding that the Chinese government has consistently invested and supported blockchain companies on both national and local levels. DropChain is a company that has developed a way of integrating blockchain into food and beverage supply chains.
Similarly, associate lecturer in computer science at Shanghai Jiao Tong University Xia Yubin said that the censorship proposed in the draft would help to keep blockchain services free of illegal materials, such as child pornography. “Currently blockchain does not support censorship, so if you put something bad on blockchain everybody can see,” Xia explained. “Definitely for our country we need to find a solution to this—especially with regard to illegal content.”
However, Tamar Menteshashvili, founder of Shanghai Jiao Tong University (SJTU) Blockchain Hub and a doctorate student at SJTU, pointed out that the draft could have a negative effect on the industry aside from censorship concerns. Indeed, the new regulations may place a financial burden on blockchain startups that will need to find ways to comply.
Indeed, it seems that the Chinese government is at odds with itself–it sees a need to regulate the industry that it has fostered. Whether or not the newly drafted regulations are too strict for the young industry remains to be seen; however, it’s certainly a possibility.