Recent comments from Chinese President Xi Jinping may have been misunderstood. While he advocated for increased use of blockchain technology, many took this to be a pro-cryptocurrency stance. The Chinese government clarified the situation – cryptocurrency’s position in China remains precarious. Governments are disinclined to allow control to slip from their hands. As such, China has no intention of allowing cryptocurrency to usurp their state-controlled fiat. Rather, President Xi believes that a state-run digital currency would benefit from blockchain technology.
Clarifying his stance, President Xi declared that cryptocurrency is “financial fraud” and “an illegal ponzi scheme.” This mindset is in part driven by the cryptocurrency industry’s current state of affairs. Many initial coin offerings from late 2017 and early 2018 failed to perform. A significant subset of those ICOs are now abandoned, with investors left with nothing. China will likely never warm to foreign cryptocurrency projects. Yet, the lack of accountability in the cryptocurrency industry may harm its chances across the world.
Slowly Progressing Crypto Restrictions
Actions speak louder than words – and China’s actions are pointedly anti-cryptocurrency. Their campaign against cryptocurrency began with a ban on initial coin offerings. Soon after, they expanded the ban to include foreign cryptocurrency exchanges. Despite the added difficulties, the native Chinese cryptocurrency industry continued to grow. The nature of blockchain tech and cryptocurrency makes it difficult to stamp out entirely.
Most recently, China began to crackdown on crypto-related social media. Chinese messaging app WeChat saw a marked decline in conversations regarding cryptocurrency – after the government made clear that group chat leaders would be held accountable for said conversations. Further, the Weibo accounts for both Binance and Tron have now been banned.
Recent Backlash Against China
Although China continues to exhibit a strong ability to enforce their will, cracks are appearing. Increasingly dire protests in Hong Kong against Chinese rule are bleeding over into social media. Tacit approval of Chinese actions by western companies has caused considerable outrage. Although self-censoring to appease China is not new, western audiences are finding it increasingly stifling.
China found little resistance to their soft power pushes in the past. Now, with pressure mounting on them from all sides, they may find themselves in a new position. Cryptocurrency represents a means of extracting financial power from governments. China has every reason to fear this fact.
Article By: Adam Stone