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Is China Cleaning Up its Digital Market?

23 August 2018 20:30, UTC
Is China Cleaning Up its Digital Market?
By Oleg Koldayev

China came to grips with a problem of fighting against the crypto business on its territory. But this does not mean that the Celestial Empire has lost interest in this segment of the market. Quite the contrary. Chinese capital owns crypto exchanges and blockchain companies, invests money in startups. But all this, as they say, is the goods for export.  Inside the country, there are only bans. What processes in the external and internal markets gave rise to the Great Chinese Ban?

WeChat messenger blocked accounts of four cryptocurrency Mass Media. Jinse, Deepchain, Huobi News and CoinDaily are slapped with sanctions. Four months ago, the access to the account of the Xiao Xieyi blockchain application was stopped, with the help of which users could generate unique network identifiers. The chat administration motivates its actions by the strict observance of "Temporary requirements to the development and management of public information distribution services in instant messaging tools". One of the rules prescribed in the document reads: "Users of instant messaging tools must meet the requirements of the current legislation. If the IM service users violate the terms of the agreement, the IM service provider must take measures, such as warning, limiting, suspending and closing the account ..."

A day later, the information appeared that the authorities were ready to continue the repressive policy in respect of crypto companies and block the Internet sites of 124 exchanges. The thing is that the state fintech control service has discovered that the platforms use foreign IP addresses, but at the same time provide exchange services to the residents.

From bad to worse. It turned out that on August 17 local authorities of Chaoyang District, the business center of Beijing had issued a circular for owners of office buildings, shopping centers, and hotels. It refers to the undesirability of placing crypto companies and carrying out activities related to cryptocurrency events. This is already a qualitative leap in the struggle between the Celestial Empire and the market of virtual assets. The confrontation shifted from high spheres of financial regulation to the organizational and economic level. The seriousness of the intentions of the authorities of the largest state in the world is no longer in doubt.

But at the same time, China is making great efforts and is investing in the development of blockchain technology. For example, the Shanghai Stock Exchange and the Association for the Management of Insurance Assets of China signed an agreement on the development of a pension system based on the distributed registry technology. The purpose of the agreement is to create a new cheap and reliable mechanism for providing the state insurance services. And to ensure that officials are well-versed in the abyss of unfamiliar terms, the Chinese Communist Party issued an ideologically correct manual "Blockchain: a guide for public servants."

At the same time, the communist power remains the non-competitive leader in the production of equipment for mining and is not going to lose this ground.

The tight restriction on cryptocurrencies in the country, the unspoken support of crypto exchanges in the world and the all-around promotion of blockchain is not a contradiction, as it might seem.

On the contrary, it is a logical and consistent development of the Chinese policy concerning the digital market. To a degree, those experts who believe that the purpose of China's ban policy is to clean up the country of unwanted and uncontrolled cryptocurrencies are right. The economic giant benefits from the collapse of the digital token market today to enter it with its coin tomorrow. After all, the group to develop the homegrown Chinese cryptocurrency continues to operate. The intra-economic free from competitors is needed in order to develop the project. The exchanges are necessary the world trade infrastructure. Blockchain- to create a system of circulation and redistribution of assets.

If tomorrow there is a powerful digital Yuan in the weak crypto market, then the virtual financial industry will receive not just a boon, but a kick of a cosmic scale. The main competitor of the Celestial Empire - the United States - will only have to eat their hat. The new economy will become entirely Chinese - just as today the fiat financial system is mostly the American. We need a new Bretton Woods system. And in this case, the countries of the North Atlantic alliance will dictate term by no means.

However, all this has one technological trouble. It is not possible yet to create a real state cryptocurrency at the current technological level, if only because it is impossible to personally control emissions. The experiment with NEO showed that only government support is not enough. You need a strict peg of each digital token to each electronic fiat monetary unit. Only then the state support will work. Miners around the world will mine the Chinese digital Yuan on Chinese equipment. And it seems that it won’t be long now.

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