Pages of news sites are filled with statements about the green light for the cryptocurrency market in China, the new «to the moon» on the Asian pull and «revolutionary» speech of XI Jinping. Whether the gates of China now open to bitcoin and what can turn the change of the vector of regulation for cryptocurrency and the entire industry?
For the last week in China there have been a number of events, pereproshivka of cryptocommunist nothing less than a ban on ICO and crackdown on Chinese exchanges in 2017. If up to this point you have no desire or time to swapnote news, here’s what happened:
- October 25, President of China XI Jinping (President of China) has officially addressed the Committee of the Politburo, among other things noting that the blockchain could provide an economic breakthrough in the country. The head of China called on to determine priorities for the use of technology and to allocate resources for the necessary research.
- On October 26 the government of China adopts the «Law on cryptography». The document is remarkable in that it regulates not economic, but technical component tokens and cryptocurrencies. In particular, they are used to set standards for hashing and key management access. I wonder what the Law is «hung» on the national people’s Congress meeting from the month of may, and the fact that he was accepted the next day after the speech, Jinping was a pure accident.
- October 28, Lu lei Deputy Director of the State administration of foreign exchange of the PRC made a statement that China intends to use the blockchain to create a single channel of foreign investment and to apply this technology in international payments.
- On 30 October, the Central Bank has issued standards for certification of hardware and software. Among other things, it mentioned used to create the block chain technology Trusted Execution Environment. The presence of standards allows the regulator to validate the design of digital products (including on the basis of the blockchain) at least in the financial industry. Developers must obtain a license «Certification of Fintech Product» and update it every three years for legal activities.
In addition, on 30 October, the government of Guangzhou approved the establishment of the blockchain Fund size of 1 billion yuan to support companies developing and Federal public blockchain. Similar projects already exist in Shanghai and Beijing — major Chinese agglomerations.
Most interesting is that in the projects supported by the Fund of the company shall not use the cryptocurrency.
Against this background, it is worth remembering the statement of the Central Bank about the completion of work on a national cryptocurrency, so-called «cryptogenes», which according to experts should appear in the near future. Apparently, the development of currency coming to an end, and the regulator approved the legal framework for its development.
This explains the ban on the use of cryptocurrency in local projects and unwavering stance against bitcoin (still a ban on trading and ICO). These decentralized assets must take a national controlled two-level payment system «cryptogamia».
Hold your horses bulls
The reaction to the speech, XI Jinping, was the rapid and almost instantaneous. The day of the event, the number of mentions of the blockchain in WeChat grew by 329%, and the number of similar queries to Baidu — 1 382%.
Traders and investors also seem to have decided that the call to work on the blockchain projects predicts green light for cryptocurrencies in China in the near future. First bitcoin, and then the number of altcoins has shown growth. However, among violas grew up only coins, or otherwise associated with Chinese companies — NEO, TRON, Ontology, Qtum, and others. The first cryptocurrency, that all showed a rally of the magnitude of the Dec 17th — the day rose to $2000:
Graph of value of bitcoin in October 2019
Noticing such an active response of the market, the government of China decided to hint to traders that the new «crypto heaven» is not worth waiting. In a local publication People’s Daily published an article stating that the government’s support of the blockchain does not mean support for the cryptocurrency.
«The growth of the blockchain was accompanied by the development of cryptocurrencies, but innovations in technology do not mean that we have to speculate on virtual currencies»
And all anything, you never know what journalists write, only the People’s Daily is in control of the socialist party of China, so an article can be considered even an indirect, but a warning that bitcoin and other currencies no one is going to put already settled in China.
Besides, in this country and its innovators. On 27 October, the Centre for the development of China’s information technology has published a report, according to which China operates 700 companies, including 83 research organization. These companies only last year introduced the 151 solution using blockchain in 28 industries, including logistics, healthcare and financial sector.
The new legislation doesn’t China opens up to international projects or cryptocurrency, but rather should strengthen, simplify (and put under the control of the government) activities of Chinese companies.
The consequences for bitcoin and industry
Despite the fact that China does not approve of volatile and unregulated bitcoin in their country, to extract it nobody forbids. Moreover, cheap electricity from hydropower plants of Sichuan creates favorable conditions for the placement of mining farms in the region.
So, on October 28 the local cell of the socialist party of China held a meeting on further development of the province where it was noted that 70% of bitcoins mined in Sichuan. If we add to this research Coinshare, according to which the region hosts more than half of the mining capacity of the network, and it begs the disappointing conclusion — the first cryptocurrency only formally remains decentralized. And if the government of Sichuan will continue to develop mining-loyal policy, this trend will only intensify.
Yes, mining is a technical process and with its help to control the spread of bitcoin is difficult, but if China feels about bitcoin a threat to «cryptowall» that will be enough to issue one order to a giant farm the same fate as the exchanges in 2017. The network in this case normalizes the processing of transactions due to the conversion difficulty Hasrat, but it will take about two weeks. If during this time BTC holders will start to panic and «dump» their coins, the bitcoin exchange rate can significantly decline.
While the US and EU joint efforts jeopardize the launch of Libra, China is beginning at full speed to exploit the potential of the blockchain creates its own global payment network and simultaneously thinks through a plan to address its main competitors — the decentralized cryptocurrency. And no one knows that more threatens the dollar, the idea of a Zuckerberg or speech XI Jinping.