In order for cryptocurrencies and blockchain startups to thrive, they need a favorable (or at least neutral) regulatory environment. That’s why we’re seeing innovation in Japan and struggles in the U.S. It’s also why we saw digital currency prices fall earlier this year after China cracked down on trading and South Korea adopted new KYC measures. But as we’re starting to discover, China isn’t opposed to all cryptocurrencies. China only opposes the ones it can’t control.
What’s new: The head of the People’s Bank of China told reporters Friday that he envisions a time where digital currencies replace cash because they’re faster, cheaper and more convenient. And his (and the government’s) opposition to crytpocurrencies has nothing to do with utility, but rather because they’re used for “speculation and making people have the illusion that they can get rich overnight.” (Bloomberg Technology)
Then on Monday, the Chinese government announced it was setting up a committee to create technical standards for blockchain technology. (OpenGov Asia)
Why does this matter? Taken in tandem, these two announcements indicate that China recognizes the value of blockchain technology and isn’t anti-crypto. It’s just anti-speculation. China doesn’t view existing cryptocurrencies as payment methods. It sees them as speculative investments — almost like gambling. China has been cracking down on money moving from China to casinos in Macau over the past two years (and wrecking Macau’s economy in the process) and this falls in line with that movement.
Be smart: China was against the Internet until they could control it. Once China figured out how to control it, it embraced the Internet. Cryptocurrencies will follow the same path. China will oppose them until it learns how to control them. The cryptocurrencies and companies that understand this will find success in China. The rest will be spinning their wheels.