Examining the China Crypto “Ban”
Last week, many minor statements fomented a mountain of fear, uncertainty and doubt regarding cryptocurrency’s future in China.
On Tuesday evening, WeChat blocked a few crypto-oriented news official accounts. Late in the evening the next day, Beijing’s Chaoyang District banned public venues from holding crypto-related events. By Friday August 24, the Wall Street Journal called for my opinion about late-night rumors intimating preemptive government action against 120+ cryptoasset exchanges still conducting consumer-facing operations in the mainland. By the time a long-planned blockchain summit took place on August 24th and 25th at the Hilton near Shanghai’s Fudan University, many keynote speakers and attendees had found reasons to stay away. Going to such an event during a week full of rapid-fire negative sentiment didn’t present much upside.
That shyness, however, is due to the way Western media portrays events in China. Digital media itself these days is a clickbait-oriented sensationalist echo chamber where people focus on headlines and only read articles that conform to expectations. That situation is only made worse when crypto influencers like Danhua Capital Managing Director Dovey Wan tweets out pictures of the primary source of the Beijing district ban in Chinese along with misleading English comments, “The new China crypto BAN is now official.”
The logical equivalent is to post on Weibo an official English notice from the NYC police banning handguns in Manhattan and then claim in Chinese, “America’s BAN on handguns is now official.” One wonders what her motivation is exactly.
Most casual observers of Chinese politics do not understand that rarely, if ever, does the Chinese Communist Party issue bold black-and-white proclamations. There are no brazenly public decrees of the George W. Bush variety like, “You’re either with us or against us.” By design, Chinese law maintains a grey area, an Hegelian nuance that provides for innovative creativity while at the same time attempts to ward off destructive tulipomania and outright scammers.
As such, “old China hands” like myself have learned to read between the lines. It is within this subtext that patient and interested observers find true regulatory intent. With this in mind, blockchain enthusiasts should note the following caveats before freaking out about the recent bout of negative news items.
First, the national government has had no direct involvement with any of these actions. So far, a single district in Beijing and a development zone in Guangzhou have explicitly called for venue bans. WeChat and Alipay, corporations not the government, voluntarily self-regulated the blurry edges of their ecosystem that facilitated illegal behavior such as coordinating pyramid schemes and averting capital controls.
Second, “blockchain” is not “crypto.” The venue ban documents only mention “cryptocurrency” (xuni huobi). The Chaoyang District document cited in Ms. Wan’s tweet does not even mention the Chinese word “blockchain” (qukuailian) once. Lastly, in comparison to the events of last September in Chinese blockchain news, which outright banned ICO’s and fiat-to-crypto exchanges, we’re nowhere near that.
All to say… RELAX, everyone! In the long run, Chinese president Xi Jinping supports blockchain. On May 28, in an important Chinese Academy of Sciences speech, Xi recognized it as one of the five pillars of a “new generation of information technology” along with AI, quantum computing, mobile internet, and IoT.
The recent crackdown is more about limiting the “leek cutters,” not about limiting blockchain development.
Editor’s note: This article is written by Nicholas Krapels. Nicholas Krapels is an American writer, educator, and entrepreneur who has lived in China since 2011. While working towards his PhD in Chinese politics at East China Normal University, he teaches finance and business strategy at Shanghai-area universities and is the Shanghai Community Manager for the international blockchain advocacy group FinTech Connector and Director of China Business Development for DarcMatter , an alternative investments platform powered by the NEM blockchain. He is a serial startup advisor, stock and cryptoasset portfolio manager, and absolutely loves investing.