Chinese President Xi Jinping’s endorsement of blockchain technology last week had many ripple effects.
It sent the cryptocurrency markets on a tear. It added weight to Zuckerberg’s words that if the US didn’t move ahead with blockchain innovation, China would. And it sparked a debate over exactly how and what types of blockchain China would pursue.
Blockchain, not Bitcoin
Of course, many people pointed out that China’s investments in blockchain technology would not mean its people would suddenly start using Bitcoin. Far from it, in fact. In a follow-up statement, Xi Jinping was quick to remind an excited crypto community that he was referring to blockchain, not Bitcoin.
As long-time trader, economist, and market analyst Alex Krüger pointed out, it’s far more likely that the China blockchain plans involve private chains to add additional layers of surveillance to people’s payments.
Assume China's president has private blockchains in mind. Blockchain, not crypto. Control and surveillance, not freedom and privacy. https://t.co/Az6haBQAd9
— Alex Krüger (@krugermacro) October 25, 2019
Think “control and surveillance, not freedom and privacy”, he said.
However, others maintain that it’s impossible to separate blockchain and Bitcoin. The two technologies go hand in hand. Therefore, any use or mention of blockchain will inevitably lead people to Bitcoin in the end. Hence the market pump.
Exactly how China plans to implement blockchain technology remains to be seen. But what cannot be disputed is the fact that the country is taking it very seriously indeed.
From Chinese banks being encouraged to incorporate blockchain technology for digital finance to new legislation on cryptography, it’s clear that Xi Jinping’s words are already being put into action.
Local governments start funding China blockchain projects
Founding partner of PrimitiveCrypto and trusted source on blockchain developments in China Dovey Wan has now said local Chinese governments are throwing their hats into the ring.
The local Guangzhou government today announced that it will dedicate 10 billion RMB ($150 million USD) in funding to a “blockchain subsidy” for “outstanding blockchain projects”. She commented:
“I believe all other local govs will follow, overall capital subsidy can be massive.”
Local Guangzhou gov just announced a 10B RMB (~$150M USD) government funding dedicated in "blockchain subsidy" for "outstanding blockchain projects"
More details below
I believe all other local govs will follow, overall capital subsidy can be massive
— Dovey 以德服人 Wan 🗝 🦖 (@DoveyWan) October 30, 2019
She further explains that the plan is to selectively sponsor two blockchain projects each year. These can either be public or federated chain projects.
According to financial media outlet Caijing, the subsidy for public chain projects is up to $1.5 million, with up to $500,000 made available for federated chains.
On top of that, local authorities will fund an additional 20 Chinese blockchain companies with a “few hundred thousand” dollars. dApps dedicated to the public services area will receive up to $1.5 million each.
In addition to that, there will be extra funding for local universities’ training programmes and investing in blockchain education in China. This, she says, is:
“HUGE for talent attraction and retention, all other govs will follow and compete.”
Wan explains that in China, the dynamics of local governments is game-theoretical. This means that it’s highly likely we’ll see further larger bids from different local authorities trying to “impress the central gov and CCP the most”.
What does this mean for the cryptocurrency space?
The Chinese government is keen to leave cryptocurrencies out of the narrative entirely. Wan pointed out that the definition of “public chain” in the Chinese media statement was a “chain without a token”. To which she commented, “not sure if that type of public chain exists”.
It will be interesting to see how (and if) the Chinese government plans to build blockchains without tokens or if the token functionality will be merely kept on lockdown.
In the meantime, however, any investment in the blockchain space can generally be taken as good news.
Blockchain, not Bitcoin, has now reached the highest level of the second-largest economy in the world. If that doesn’t wake up the sluggish American regulators falling asleep at the wheel, nothing will. This could be the start of many more exciting developments to come.