Cryptocurrency concept art

Beijing continues clampdown on cryptocurrency, despite blockchain promotion

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The Chinese government has continued to lead efforts to clamp down on cryptocurrency speculation, CNBC reports, as cryptocurrency and blockchain activities continue.

In September 2017, the Chinese government placed heavy restrictions on initial coin offerings (ICOs) and effectively forced the closure of Bitcoin-yuan exchanges, resulting in a 6 per cent decline in the value of the largest digital currency. However, cryptocurrency activity including energy-intensive cryptocurrency mining has been enthusiastically continued in China.

In August, there was a further crackdown on cryptocurrency activity, with warnings from multiple public bodies issued about the risks associated with cryptocurrency fundraising, including via overseas servers. Tencent, one of the world’s largest tech companies, banned cryptocurrency transactions through WeChat Pay: its mobile payments system which is used by 600 million users a month. Promotional content related to cryptocurrency has also been banned from busy WeChat and Baidu forums.

During the same period, Chaoyang District (a core shopping, business and cultural district in central Beijing) and the industrial Guangzhou Development District announced a ban on promotional cryptocurrency events.

Cryptocurrency restrictions of varying severity have been introduced in South Korea, Taiwan, Thailand and many other governments in Asia. The White House and IMF have reportedly considered regulation of cryptocurrencies, while internet giants such as Google and Facebook have clamped down on misleading cryptocurrency advertising on their platforms.

CNBC reports that, despite the continued crackdown on cryptocurrency speculation, Beijing is continuing to push for blockchain innovation, having dedicated an estimated $3.57bn (£2.77bn) since 2016 to support and promote the technology which underlies cryptocurrencies.

China was the world leader in blockchain-related patents in 2017, with approximately 10 per cent of these patents originating from Chinese e-commerce giant Alibaba.

A blockchain is a permanent, publicly distributed, cryptographically secured set of records (blocks) which are essentially impossible to tamper with and which negate the need for a third party such as a bank.

Although originally created to support Bitcoin, the first and largest cryptocurrency, the technology is believed to have myriad other applications due to its inherent transparency and security. Despite many suggestions, such as to create transparent and ethical supply chains, no major applications outside cryptocurrency have so far emerged.

The Chinese State Council’s 13th five-year economic plan, published in 2016, mentions blockchain multiple times as an element of China’s short-term economic future. In a speech in May, President Xi Jinping praised blockchain as a “breakthrough” technology, along with artificial intelligence, quantum information, mobile communications and the Internet of Things (IoT), and called on China to continue with technological development to become a world-leading centre of science and innovation.

Last week, it was announced that the University of Oxford would be establishing its own blockchain research centre, which will explore the issues of the high energy use associated with cryptocurrency mining and new privacy and fair exchange models to support exchanges.

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