More than just Bitcoin: blockchain technology in China
After eight years of organic growth, community development, and mostly word of mouth advertisement, Bitcoin exploded into the public sector and surged upward in its demand and price. At first, governments were unaware of this new international grassroots currency. From underground tech meetups to now mainstream media, the subject of cryptocurrency is unavoidable.
Some governments have welcomed cryptocurrency with open arms while others have taken a more conservative stance with outright bans and penalties for mining and trading. In September of 2017, just when Bitcoin was breaking $4,000 in value, China shut down its domestic exchanges and began its ban of Initial Coin Offerings (ICOs). Three Chinese exchanges, Bitfinex, OkCoin, and BTCC which made up over 45% of the global market share were forced to stop their trading and services.
Chinese exchanges fled to Singapore, Hong Kong and South Korea, and Bitcoin’s price took a momentary nosedive. Bitcoin’s growing popularity in China may have caused the government to begin to perceive it as a threat to local currency, especially as Chinese investors bought up bitcoin, betting against the yuan. ICOs are a hybrid of crowdfunding, Venture Capital and initial public offerings, and were blamed for disrupting the country’s financial order as an unapproved and illegal form of public financing. Those still wanting to raise money had to do so offshore by way of Estonia, Malta or other nearby countries.
While China did ban cryptocurrencies, close down exchanges, and force companies who raised collective billions in ICOs to give it back to investors, the underlying technology of blockchain remained. Simply put, the Chinese government did what governments tend to do: move at a slower pace.
Fast forward to May 2018 and China is preparing new regulations on cryptocurrency and ICOs. Blockchain companies are now able to develop in a legal and risk-controlled environment. China has been reported to have the largest number of Blockchain patents. The Chinese government funding of a $1.6bn fund to finance more projects in the cryptocurrency space is proof that it has embraced the technology behind Bitcoin.
Chinese companies have begun Blockchain based pilot tests, processing data in real time and in a decentralised manner. AliPay and TencentPay, two of the biggest FinTech applications in China, have expressed their optimism towards implementing Blockchain-based payment systems. JD.com, a major Chinese retailer is using Blockchain technology to track the shipping of domestic and international beef products, and insurance firm ZhongAn has been utilising Blockchain-based systems to trace and monitor the life cycles of poultry.
The Chinese government is adapting quickly and quietly to this new disruptive technology, knowing that it can revolutionise trade and finance. While patience is key, the world of Bitcoin is watching closely, knowing that China represents a massive population and one that is readying itself to invest in the next financial revolution.
Julian Zegelman, co-founder of TMT Blockchain Fund is an experienced corporate lawyer, serial entrepreneur and angel investor. He specialises in corporate law, securities, venture capital and cryptocurrency law. He is a multiple winner of the prestigious California SuperLawyers® award.
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