Blockchain in China is entering into a “government-led mode,” according to certain commentators. The government is increasingly investing into the technology with Hangzhou announcing a $1.6 billion blockchain fund, followed by Shenzhen announcing its first venture capital fund of RMB 500 million and, finally, Fujian province offering funding supports to blockchain startups, all in the same month.

During this year’s GMIC in Beijing, TechNode talked Danny Deng, Chairman of Tai Cloud and the head of the China Blockchain Delegation at last year’s World Economic Forum in Davos. Deng shared his views on the future of digital identity, and his views on why the Chinese government likes blockchain but dislikes cryptocurrencies.

“China is quite conservative for all kinds of investment and trading not related to the real industry,” said Deng. According to him, the government is realistic but at the same time curious to find out what kind of benefits blockchain can offer to them. Another side is that China is developing its own system for its own social environment in which bitcoin and Ethereum that guarantee anonymity have no place.

“They want something they can easily adopt but not change the whole social structure because that would make the country fall into chaos,” said Deng. “I think the Chinese government is still learning, they do not want to miss any chance to give up the country, but they also fear that new technology may have a heavy impact to the society which the society cannot stand.”

China’s effort to grab its position in the emerging technology is not new. In 2016, blockchain was written into the 13th Five-Year Plan. During 2017, China has also become the leading country for blockchain patents with its central bank, the People’s Bank of China (PBoC), number one on the list, according to a research published by IPRdaily. The country has also seen several projects related to blockchain including the Blockchain Registry Open Platform (BROP) developed by the Zhongchao Blockchain Research Institute under PBoC.

Tai Cloud is also a part of China’s cautious but firm step into blockchain. The company is working with China’s Ministry of Industry and Information Technology (MIIT) on solving problems like credible ID authentication, consensus mechanism, and governing models. It has helped establish China’s first blockchain sandbox in Ganzhou, Jiangxi Province (in Chinese). The financial industry sandbox enables regulators to interact with startups and create a balance between risk and opportunity, said Deng.

“In a sandbox, we can provide a very protective environment for blockchain startups. We enable them to have a chance to negotiate with regulators as early as possible. We all know that blockchain is developing so fast so a company might look quite young but might grow big enough to give a big impact to the country, even to the whole world,” Deng told us.

Deng also shared his views on the growing trend of digital identity, a concept that sounds quite ordinary but has the potential to change the future of how we see ourselves as workers and citizens.

“I think digital identity is naturally grown thing, it’s not something we plan,” said Deng. “Many companies and blockchain projects are working in the same direction. You may have an identity in different blockchain systems and all these IDs will hold a part of your social relationship, a part of your assets, your working platform or intellectual property.”

However, being a digital citizen might take a whole new meaning. During the “How to Build a Digital Country” panel at GMIC’s Digital Economy Forum on April 26, participants discussed the implications blockchain will have on governance and citizenship. According to Deng, countries will not attract people physically but “virtually.”

“We will have two kinds of identity. One is physical, so which country I’m born in, which nationality I have, said Deng during the panel. “The other will be a digital identification and will be much more important than my real-world identification. This will become a problem for governments when you can choose which services you want – from more open countries.”

Virtual identities could enable countries to compete for talent and completely reposition themselves in terms of innovation. This also means that future of immigration might look quite different. Estonia is an example in the making: the country launched a blockchain-based e-Residency program which allows anyone to apply for citizenship. Although setting up an e-Residency is still a relatively complicated process, it could be a sign of things to come.

“All countries will compete with each other to attract the most talented people, best technology, and smartest capital. If you miss this chance, you may miss a hundred years.”

Masha Borak is a technology reporter based in Beijing. Write to her at masha.borak [at] Pitches with the word "disruptive" will be ignored. Read a good book - learn some more adjectives.

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