The Two Faces of Cryptocurrency in China

Even after shutting down dozens of bitcoin exchanges and banning bitcoin executives from leaving its borders, the“mouthpiece” for the People’s Bank of China, Financial News, published an article declaring that Beijing should “accelerate the process of launching a digital currency after it curbed the risks of [en]cryptocurrencies.”

Furthermore, last week, China’s Ministry of Information and Technology launched a “trusted blockchain alliance” devoted to the study of blockchain technology.

This news is taken alongside reports of China issuing a “comprehensive ban” on platforms that allow the buying and selling not just of bitcoin, but more generally, of virtual currency.

The Chinese government has also encouraged firms to fund their own research on blockchain technology.  Back before China banned bitcoin exchanges, but after it banned ICOs, Sun Guofeng, the director general of the People’s Bank of China, said that China’s banning of all ICOs “should not prevent relevant financial technology companies, industry bodies and other technology firms from continuing their research into blockchain technology.”

The Chinese government then proceeded to ban the trading of bitcoin and other virtual currencies.

The director, at the time, also stated that China’s ban on ICOs was “necessary and timely,” citing a need for greater consumer protection in the relatively unregulated industry that is cryptocurrency creation and exchange.

This is not necessarily a contradiction, in itself.  The uses of blockchain technology extend far beyond cryptocurrency, and the regulation of ICOs and cryptocurrencies are related, but separate.

However, there is still the fact that a publication well-known for espousing the Chinese government’s official stances has recommended that the government continue its plan to launch its own digital currency with blockchain technology.  In the words of the South China Morning Post, the article’s “publication in an official newspaper reflects the Central Bank’s endorsement of this view.”

In other words, no, companies in China cannot create or sell their own, or any, cryptocurrencies; but yes, they should spend money on researching the technology that makes them possible.

In the meantime, the People’s Bank of China’s newly-created “trusted blockchain alliance” will do the same.

Read more at Bloomberg News, CNBCSouth China Morning Post, and The Verge.