Two years ago, the Chinese government issued a sweeping crackdown on cryptocurrencies and initial coin offerings (ICOs), which has shifted the trajectory of blockchain development in China.
The red tape around the blockchain industry has driven some to more lenient markets and others to exit. The Chinese government has taken a more proactive role in regulating blockchain technology while simultaneously expressing its support for blockchain.
“Blockchain is the first piece of technology where innovation is happening not only in the US but also at the same time in China,” said Sarah Zhang, founder of Points (PTS), at the Emerge by TechNode conference yesterday.
Zhang was joined by Steven Wang, head of market research at Ant Financial’s blockchain subsidiary Ant Blockchain, Jerry Yang, venture architect and solution consultant at ConsenSys, and Tyler Aveni, head of international partnerships at WeBank.
About the Chinese government’s approach to regulating the emerging technology, Zhang said some industry watchers complain that there is a lack of consistency across the regional and central government and across different regulatory bodies. However, this phenomenon happens in technologically advanced countries like the US too, she noted.
Some believe that different regulatory bodies approach regulation from different lenses and that the mixed signals, or competition, between government organizations is beneficial to the creation of industry regulations. It allows room for regulators to experiment and innovate, said Zhang, testing what works and does not. For example, in China, the Ministry of Industry and Information Technology (MIIT) is more interested in industry standards, while the central bank is exploring areas such as blockchain technology use in trade finance and cross-border payment systems.
Another topic hovering on the horizon has been buzz in recent years about the central bank creating a digital currency. The possibility has left a lot of room for imagination. For example, Zhang said one future scenario could be that digital currency created by the government significantly increases monetary flow transparency, which would allow monetary policymakers to track transactions more easily and potentially predict the impact of a policy change more accurately.
The separation between the central bank and commercial banks might also become more blurred if blockchain technology makes the financial system and its operations more seamless, Zhang said.
Though the future of the financial system is still an open question, blockchain technology’s growing role in that future is becoming apparent.
Blockchain in China has cycled in and out of favor in recent years. Wang from Ant Blockchain explained that before the crackdown two years ago, cryptocurrency was closely associated with blockchain technology. But this is not the case anymore.
Now, companies are more interested in blockchain solutions that actually solve real problems such as providing more inclusive financial services and improving efficiency in medical care. It is about “bringing trust into the system,” Wang said.