China May Have Banned Bitcoin, But Its Blockchain Ambitions May Help Other Nations Launch CBDCs
The Chinese Government’s comprehensive crackdown on crypto may, at first glance, seem like a stifling of innovation. But this couldn’t be further from the truth. In reality, unregulated speculatory coins simply run counter to China’s plans for its own digital currency. To that end, they have restricted such assets in their country and are creating the basis for a new financial structure. One based upon their upcoming Digital Yuan and the creation of a blockchain service sanctioned by the state itself. This, along with the integration of powerful new blockchain partners, looks to help China — and potentially the rest of the world’s economies — debut their own digital currency.
China’s Ongoing Stance Against Cryptocurrency
Over the last several years, China has placed numerous bans on cryptocurrency — 19 to be exact — each with increasingly strict laws concerning its use in the financial system. In September, the Chinese Government offered a final, conclusive stance on cryptocurrencies — banning all mining operations and making it illegal for any business to transact with these assets. While individuals owning cryptocurrency have not been outlawed definitively, it has left precious few avenues for them to acquire or sell cryptos, effectively shuttering the industry inside of China.
This is not just an arbitrary distaste for crypto assets, mind you, but part of a much broader vision of the Chinese government. See, China may not like crypto, but they do like blockchain technology. They have been relatively vocal about this for some time, and are also working on the rollout of their own sovereign digital currency, dubbed DCEP. This Central Bank Digital Currency, or CBDC, will leverage the features of blockchain to give the government complete oversight and control of the monetary supply.
Enter the BSN
This isn’t just about mainland China either; it’s about China’s place in the evolving global economy. The state-backed “Blockchain Services Network,” or BSN, has emerged as a means for China to secure its dominance in the blockchain arena. The BSN is one of the only government-sanctioned blockchain networks in the world and certainly the most developed.
Backed by Beijing and various state-owned companies like China UnionPay, China Mobile, and China Merchants Bank, BSN provides an affordable and composable platform where developers can leverage blockchain technology in order to build decentralized applications (Dapps).
This stands to place China at the forefront of blockchain innovation but doing so in a way that is regulated and under official oversight. This is in drastic contrast to the “wild west” that has evolved around unregulated DeFi projects, which the government sees as destabilizing. However, in order to see this fulfilled, BSN needs to integrate with other prominent blockchains to offer services across the entire ecosystem. This has already happened with many big names such as Ethereum, Hyperledger Fabric, Tezos, ConsenSys Quorum, and Cypherium.
The integration of these blockchains into the BSN actually stands to be a huge step forward for integrating with other CBDC’s in the coming years. By connecting with so many different parts of the decentralized ecosystem, the BSN can make huge strides in pushing development forward.
How These Partnerships Can Help the BSN and the World
The BSN’s overall goal is to give developers access to the tools to develop the next generation of decentralized applications, aka dapps. Furthermore, projects will have the ability to run their own nodes leveraging the bandwidth of the BSN, and they can even utilize various resources from any of the other partners. These partnerships range from a variety of blockchain projects to cloud services and technology firms.
For example, in January, BSN partnered with New York-based Ethereum hub ConsenSys to bring their enterprise ledger, Quorum, into the pool of resources available to developers. Quorum is an open-source protocol layer allowing projects to deploy dapps on Ethereum, and access will be available through BSN’s public city nodes, located throughout mainland China. Additionally, teaming with other, similar smart contract networks like Algorand, Solana and Polkadot will also be incredibly important, as they all seek to build the future of the DeFi ecosystem, are quickly growing in popularity, and can bring different strengths to the table. By connecting different parts of the decentralized world, the BSN can actually bring more functionality and liquidity to all the projects involved.
Further, a layer 1 permissionless protocol, like Cypherium’s that is primarily focused on enabling the exchange of CBDCs, stablecoins, and cryptocurrencies like bitcoin, allows anyone to participate in its governance, making it the perfect platform to help grow integration with the coming CBDCs of the various governments of the world. This allows for the facilitating of exchange between all these assets while staying in compliance, which is exactly what the blockchain is designed to do.
Moving beyond blockchains, other strategic partnerships include premier cloud services, Amazon Web Services, and Google Cloud. These collaborations will be essential for hosting the wide array of projects that the BSN will work on in the coming months and years. Lastly, technical partners such as Dfuse and EOS Nation are also bringing their unique skills and perspective to help support every new development.
These partnerships will become the various mediums for moving value between the BSN and other global platforms. This allows it to seamlessly integrate the Digital Yuan with services both inside and outside of China. And once adopted, it could bring the entire web 3.0 economy into one functioning ecosystem.
That’s why this is so much bigger than just China, but still, the BSN can act as a major launching off point. Other nations may well see the success of CBDC’s and hasten the launch of their own. What’s key, though, is that all these assets can be traded in liquid markets and utilized in global payment rails, in a controlled and regulated manner, in order to truly unlock the potential for tomorrow’s internet.
About The Author
Sky Guo is chief executive officer at Cypherium, a blockchain company that aims to provide interoperability between cryptocurrencies, including central bank digital currencies. He has a B.S. from Pepperdine University and a degree in entrepreneurship from Draper University.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.