Roughly a quarter ago, the Chinese government was seen determined to bring down the cryptocurrency market. It had banned the digital currencies and related business activities and also blocked access to all industry websites/portals including those located outside of the country. As we covered earlier, the regulators used the “prevention of fraud and ensuring economic stability” as the prime reasons to ban.
It was a well-planned cyber crackdown. Following that, Chinese search engines and social networks stopped promoting the crypto-related advertisements and contents.
However, a couple of days ago, China Center for Information Industry Development (CCID), a government body that works under the industrial ministry, launched its monthly ratings index for 28 blockchain-powered crypto coins. CCID claims that the index is based on three criteria: technology, innovation, and real-life application, without exactly elaborating the ranking methodology. According to their first ranking, Ethereum is the top-ranked cryptocurrency, while the bitcoin is ranked at number 13.
This is the first time that a government body has issued ratings for the products (read currencies) that it has banned within its territory. CCID made this announcement last week, citing lack of a wide-ranging blockchain analytics to guide the governments, companies and research organizations about the currencies’ stability.
It is pertinent to note that financial rating agencies (like Weiss) do issue crypto ratings in the United States, but they’re largely focused on the trading, and not on the technology. However, CCID aims to study the underlying technology and market applications as a ranking factor too, which means they’re deeply studying the tokens and currencies.
This is a very interesting development – and analysts are interpreting it from two different perspectives.
First, the Chinese government is not a fan of cryptocurrencies because it sees digital currencies as a speculative instrument that could potentially harm the local investors and disturb the economic stability. This is exhibited by the introduction of strict measures to bring down the crypto-market – like banning the domestic crypto-related business activity and subsequently cracking down on the mining.
Secondly, China aims to play a wider role in the global economic and political affairs. This requires the country to be open to innovation and embrace the latest technologies since it’s fundamental to attracting international businesses. For the very reason, China has welcomed studies and research into the blockchain technology.
China’s central bank one of the pioneers that looked into the sovereign cryptocurrencies and is studying them in details. The local technology industry is mulling to use blockchain in a number of business areas – like gaming, cybersecurity, and data management. According to Thomson Reuters, more than half of the world’s (approximately) 400 blockchain-related patent applications originated from China.
Analysts believe that the recent announcements, rating project, and deeper study by the regulators indicate that China doesn’t want to prolong the ban. It aims to find out a mechanism where the state could work as neutral arbitrator towards technological innovation and support the businesses – but without compromising on economic stability.
Only last month, The People’s Daily, a government newspaper posted an article with provides a little glimpse into the crypto-related regulatory challenges. Mr. Yang, the writer, suggests that cryptocurrencies can have a profound positive impact on the financial systems, and given the wider receptivity, it is literally very hard for any country to ban it for a longer time period.