Is China Warming Up to Blockchain and Crypto?

Introduction

In May 2023, China Central Television (CCTV) aired a short segment about the adoption of cryptocurrencies in Hong Kong. However, the link to the program was taken down two days after it aired. This suggests that the Chinese government's stance on cryptocurrencies remains unchanged.

Hong Kong, a Special Administrative Region controlled by China, is looking to reposition itself as a key crypto hub in the region by reopening trading to retail investors. The new rules suggest that the new crypto rules in Hong Kong could serve as a playbook for adoption for mainland China. However, it is unclear whether this indicates a change in China's stance on cryptocurrencies. China's central bank, the People's Bank of China (PBOC), has been developing a government-backed digital currency called the digital yuan. This shows that China is interested in exploring the potential of digital currencies, albeit under strict government control. China has also recently opened up a new blockchain innovation center. The Conflux blockchain claims to be the only crypto company with approval to operate in China after the government banned all crypto products in 2021.

In this article, we will delve into the diverse ways China is shaping the future of the global digital economy. Despite its stern stance on cryptocurrencies, China is enthusiastically embracing blockchain technology and positioning itself as a leader in Central Bank Digital Currencies (CBDCs). We will explore China's launch of the National Blockchain Technology Innovation Center and its potential impact on the global crypto ecosystem.

We'll also touch upon the exciting developments in Hong Kong, which is looking to transform itself into a pivotal crypto hub by relaxing regulations on crypto trading for retail investors. This move could potentially serve as a blueprint for crypto adoption in mainland China. Finally, we'll shed light on the intriguing role of Conflux, a blockchain platform with unique approval to operate in China. Amid the country's strict ban on cryptocurrencies, Conflux might hold the key to understanding the future of blockchain and digital currencies within China's borders. Join us as we navigate through these fascinating topics.

China is open for web3

On May 11th, 2023, China announced the launch of a new center for blockchain innovation that is expected to boost the country's digital economy. China is taking big strides in incorporating blockchain technology into its society by launching the National Blockchain Technology Innovation Center in Beijing. The center is a government-backed initiative designed to research, experiment, and make advancements in blockchain technology, even as China maintains its ban on cryptocurrencies. This new hub of blockchain innovation will work alongside universities, think tanks, and blockchain companies to push the technology's development forward. Their goals are grand, with a particular emphasis on creating massive blockchain computing clusters.

The center will be run by the Beijing Academy of Blockchain and Edge Computing, the creators of the ChainMaker blockchain, a system backed by several major Chinese businesses, many of which are government-owned. One of the main challenges the center aims to tackle is to connect the isolated blockchain systems that have emerged in China in recent years. Experts believe this disconnection, often referred to as 'blockchain islands', has been holding back the rapid development of China's digital economy.

The innovation center plans to build a national blockchain computing network. This network will consist of various backbone nodes spread across the provinces and municipalities, as well as industry application nodes. The network aims to support vital areas of the national economy, including cross-border trade, supply chain finance, energy, safety, and food. Additionally, the center intends to train half a million specialists in blockchain and distributed ledger technology. It also hopes to break new ground in the technology's underlying components, such as chips and architecture, which they believe will be crucial for securing data and building the national digital economy.

China's establishment of the National Blockchain Technology Innovation Center could have a profound influence on the global crypto economy. The center, focusing on blockchain innovation, may stimulate new breakthroughs and use cases that can benefit the worldwide crypto ecosystem. Furthermore, its plan to create a national blockchain computing network could inspire similar large-scale applications across the globe, propelling the extensive integration of blockchain technology in various sectors.

Additionally, the center's ambitious initiative to train a large number of blockchain specialists could potentially help solve the global shortage of professionals in this field. China's policy of distinguishing between blockchain technology and cryptocurrencies could impact regulatory trends worldwide, possibly leading to more nations differentiating between these two in their laws.

Hong Kong the new crypto hub

Hong Kong is reinventing itself as a major hub for cryptocurrency and blockchain companies. Its aim is to position itself at the forefront of the global fintech industry. Starting from June 2023, new regulations will permit retail investors to access virtual asset platforms, marking a significant move to revitalize the city's crypto space.

Blockchain and cryptocurrency companies from around the world have been drawn to Hong Kong. The city's comprehensive guidelines for virtual assets abide by the principle of 'same business, same risks, same rules'. This means that businesses operating in the same industry are subject to the same regulatory rules, and it's designed to protect investors and manage key risks effectively.

While the Hong Kong government has warned its public about the potential risks associated with investing in cryptocurrency, it has also established clear guidelines for digital assets. These guidelines encourage cryptocurrency firms to set up offices in the city, highlighting Hong Kong's ambition to be a major player in the global cryptocurrency scene.

Moreover, Hong Kong is encouraging banks to provide services to licensed virtual-asset firms, reinforcing its push to establish the city as a crypto hub. This combination of clear regulation and active encouragement for crypto firms is positioning Hong Kong at the center of the global blockchain revolution.

As Hong Kong shapes itself into a major hub for cryptocurrency and blockchain companies, it can positively impact the broader crypto economy. By welcoming retail investors, the city can potentially enhance market liquidity by increasing crypto transaction volume, thereby fostering stability in the global crypto markets. Furthermore, its comprehensive, clear regulatory approach could serve as a model for other countries, encouraging more uniform regulations that can legitimize and standardize the global crypto industry. Finally, by drawing a diverse array of companies from all over the world, Hong Kong is creating a dynamic ecosystem ripe for innovation. This fusion of global perspectives could drive the development of new blockchain technologies and applications, accelerating the growth and widespread adoption of crypto technologies on a global scale.

China the leader in CBDC

While the center focuses on advancing blockchain technology, China continues to keep cryptocurrencies at bay, seeing them as a potential risk to the financial system. Despite this, the country is leading the way in developing a central bank digital currency (CBDC), with a digital yuan pilot program already underway in several provinces and large cities.

To add an international aspect, the French bank BNP Paribas recently teamed up with the Bank of China to allow corporate clients to make transactions in the digital yuan. This makes BNP Paribas the first foreign-owned bank to participate in China's digital yuan project, and they are also exploring further uses of the CBDC, including smart contracts and cross-border payments.

To boost the adoption of the digital yuan, the Chinese government has been incentivizing residents to use it by giving away millions of dollars worth of digital yuan during the Chinese New Year celebrations. The PBOC has also been enlisting help from the private sector to take its official digital money to a broader user base, with China's biggest messenger WeChat extending the use of e-CNY payments to transactions happening through its short video and mini-app platforms.

The Chinese government has been ramping up its efforts to popularize the use of the digital yuan, with government employees in the city of Changshu set to be paid fully in digital yuan starting in May 2023. The digital yuan is also being expanded for use in cross-border trades and the Belt and Road Initiative. China's progress towards a CBDC has attracted widespread interest from major governments, with Japan's new Minister for Economic Security indicating that Japan's comparatively slow progress on CBDCs could pose a national security risk . However, it remains unclear what form other countries' CBDCs might take.

China's embrace of digital currency and finance has been impressive, with the digital yuan being one of the first CBDCs to be developed and widely tested. While the usefulness of the digital yuan in international markets is a hotly debated topic, some experts have pointed out that, in theory, the e-CNY could be used to dodge the dollar system altogether.

China's development of the digital yuan and its blockchain infrastructure could greatly influence the global blockchain economy and crypto markets. Its pioneering role in CBDCs could inspire other nations to follow suit, potentially driving more widespread adoption of blockchain technology. The innovative blockchain systems that support the digital yuan might inspire further blockchain advancements worldwide.

Can Conflux become a blue chip blockchain?

As Hong Kong and China continue to open up to blockchain technology, one platform that stands to benefit is Conflux. This Chinese-endorsed public blockchain platform, sometimes referred to as the 'Chinese Ethereum,' has caught significant attention, especially since Hong Kong began permitting retail investors to trade cryptocurrencies.

Conflux is a creation of a group of researchers from China's Tsinghua University. It holds the unique distinction of being one of China's government-approved blockchains and plays a role in China's Blockchain Service Network (BSN), a platform designed for enterprise use. It's known for its interoperability, allowing for smooth data and asset transfers across various blockchain networks.

The year 2023 has seen considerable growth for Conflux, with its token, CFX, experiencing a staggering 1,300% price rise. This growth is largely attributed to strong foundations, such as its partnerships with major Chinese companies like China Telecom and Little Red Book. These collaborations have paved the way for Conflux to reach millions of users.

The proactive stance of Hong Kong in becoming a Web3 hub and its favorable approach towards cryptocurrencies have given Conflux a conducive environment for expansion. The platform is currently preparing to establish its presence in Hong Kong, reinforcing its role as a key player in the Web3 infrastructure. Thus, as it steps into Hong Kong, Conflux could potentially be the backbone of Hong Kong's vision for Web3.

To conclude, the openness of Hong Kong and China to blockchain technology has been beneficial for Conflux, resulting in increased attention, more partnerships, and growth in its token value.

Final Thoughts

China's strategic approach towards blockchain technology and Central Bank Digital Currencies (CBDCs) holds profound implications for the global economy. Despite its hard stance on cryptocurrencies, the nation is vigorously pioneering the development and adoption of blockchain technology, positioning itself at the forefront of the digital revolution.

China's pursuit of blockchain innovation, manifested in the establishment of the National Blockchain Technology Innovation Center, has the potential to spark worldwide advancements in blockchain technology and its applications. Furthermore, Hong Kong's ambition to establish itself as a leading crypto hub, welcoming international companies and retail investors alike, could boost the global crypto economy and foster a conducive environment for innovation.

The successful deployment and expansion of the digital yuan underscore China's readiness to explore the opportunities digital currencies offer, despite its cryptocurrency bans. This journey towards creating one of the first CBDCs could inspire other nations to follow suit, potentially triggering a wave of digital transformation on a global scale.In this evolving landscape, Conflux's unique position as a Chinese-endorsed public blockchain platform promises exciting possibilities. As it expands into Hong Kong and continues to experience impressive growth, it serves as an intriguing example of the potentials and challenges that blockchain platforms face in a country that is both restrictive and open to digital innovations.

While China remains cautious about cryptocurrencies, it continues to exhibit strong commitment and enthusiasm towards advancing blockchain technology and digital currencies. It stands as a testament to the resilience and adaptability of nations navigating the ever-evolving world of digital economies. The unfolding story of blockchain and digital currencies in China and Hong Kong offers rich insights for policymakers, investors, and tech enthusiasts worldwide. It reaffirms the belief that, despite varying regulatory landscapes, the drive for innovation and progress is a constant force that shapes our digital future.