Caixin
Sep 19, 2017 07:23 PM
FINANCE

Despite Cryptocurrency Curbs, China Backs Underlying Technology

The government research institution behind the initiative to advance blockchain technology is also preparing a platform on which companies and experts will work together to come up with more applications for blockchain technology. Photo: Visual China
The government research institution behind the initiative to advance blockchain technology is also preparing a platform on which companies and experts will work together to come up with more applications for blockchain technology. Photo: Visual China

Despite a sweeping ban on cryptocurrency fundraising and trading, China is still a staunch believer in blockchain, the underlying technology of cryptocurrencies.

The China Academy of Information and Communications Technology (CAICT), a research institution under the Ministry of Industry and Information Technology, on Tuesday launched the Trusted Blockchain Open Lab, the first government-led initiative to support blockchain technology development.

CAICT said it is also preparing a platform on which blockchain firms and experts will work together to advance the application of the technology.

China became the first country to ban fundraising through cryptocurrencies built on blockchain technology when it deemed the practice illegal in early September. Shortly thereafter, Chinese cryptocurrency exchanges announced their impending closure as supervisory agencies widened their regulatory scope. All major Chinese bitcoin exchanges are slated to close by Oct. 31 at the latest, with most shutting down by the end of this month.

The new technology’s complexity and ability to cross sectors have spawned illegal activities, Di Gang, vice director the central bank’s digital currency research institute, said at a blockchain conference on Tuesday.

“There have been many blockchain conferences where the number of business personnel exceeds technical personnel,” he added. “The number of people with liberal arts degrees surpasses those with science degrees. The company’s boss speaks more than the people doing the work, and even in the U.S., Wall Street talks more than Silicon Valley. This is not conducive to blockchain development.”

At the same conference, Wang Suzhen, deputy secretary general of the Payment & Clearing Association of China (PCAC), said blockchain has seen intense development, opening a door for the shared economy, but also attracting speculators and illegal activities.

“Some ICOs do not have a whitepaper, and some projects have nothing to do with blockchain technology,” Wang said. “Many investors blindly chase ICO fundraising,” she said, “but because blockchain technology requires technical knowledge beyond the understanding of the average investor, these investors are not able to analyze the feasibility of a project and thus have to rely on what the issuer says.”

Regulations on ICOs effectively limited the continued spread of illegal fundraising through cryptocurrencies, she said, preventing more investors from losing money.

PCAC is an industry group whose members include banks and payment service providers.

Last week, Sun Guofeng, head of the PBOC finance research institute, said that China’s recent ban on cryptocurrency crowdfunding should not deter future research on blockchain technology.

Sun argued that blockchain is not — and should not be — just about cryptocurrency. Outlawing ICOs should not stop financial-technology firms from researching and developing blockchain technology that can be used in a wide array of applications unrelated to cryptocurrencies, he added.

Blockchain technology will likely need five more years to be more widely applied, He Baohong, vice director of the CAICT Standards Office, said at the same conference.

Contact reporter Liu Xiao (liuxiao@caixin.com)

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