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Major Chinese Study Reveals Positive Economic Impacts of Blockchain on Economy

A recent report from a leading Chinese research institute under China’s Ministry of Industry and Information (MIIT) and Tencent Holdings has concluded that blockchain technology will have a “profound impact” on creating a legal digital currency and drastically improve financial services.

Blockchain above all else

Other than blockchain technology itself, China has held a rather strict stance on initial coin offerings (ICOs), cryptocurrencies and exchanges. In late 2017, the People’s Bank of China (PBoC) banned ICOs, deeming them an “illegal fundraising” method, then shortly after in February 2018, banned cryptocurrency trading entirely.

However, China is growing fond of the underpinning technology that powers ICOs and cryptocurrencies. In recent months, there has been a notable rise in blockchain related activity in the country, with rises in blockchain-named companies increasing by 500% and even the PBoC adopting the nascent tech.

Economical enhancements

The 24 July report that was produced by The Academy of Information and Communications Technology and Tencent Holdings has eight key conclusions, one being that “blockchain will play a positive role in the financial system”.

However, it states that the application of the tech in finance is presently limited to offering new solutions for “the issuance and circulation of asset equity certificates under a new perspective”.

It also adds on the matter, saying that, “Blockchain directly affects currency circulation and financial instruments, and indirectly brings changes in financial market and financial market operations. These two points are two major innovations. At the same time, financial market operation efficiency is improved.”

The study gives nod to the value of blockchain in supply chain finance, which is often cited as a facet of businesses that will benefit most from blockchain.

Fascinatingly, the study raises eyebrows by mentioning a legal digital currency that can operate basic functions such as “a trading medium, pricing unit and value storage”.

Blockchain can be the tech that makes this a possibility. The study writes, “The blockchain pair will have a profound impact on the establishment of the legal digital currency issuance and circulation mechanism.”

In addition to these, it concludes that blockchain will greatly impact payment and settlement, securities trading, insurance and credit reporting.

Investment in the chain

The report is timely as the drive in China for blockchain adoption is at an all-time high. In recent months, governing bodies of Chinese cities have been investing incredible amounts of funding into blockchain startups and academic innovations.

Nanjing recently announced a USD 1.48 billion fund for academic innovations, blockchain startups as well as companies who are seeking to integrate technology into their businesses. In April, Shenzhen received USD 80 million for blockchain startups in the city, and shortly before, Hangzhou was the recipient of a USD 1.6 billion blockchain innovation fund.


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Chinese Ministry of Industry and IT Anticipates Big Year for Blockchain

China’s Ministry of Industry and Information Technology (MIIT) released a whitepaper on 20 May 20th detailing the accelerating growth and prospective future of blockchain industries in the country.

China has notoriously been a slightly cryptocurrency-friendly environment; stances in the country seem rather juxtaposed. For example, initial coin offerings (ICO) and trading are banned entirely, but the nation still promotes blockchain technologies with e-commerce and tech giant Alibaba being a notable example of bullish attitudes toward blockchain technology in China.

The value of blockchain in China

However, the report from the ministry reveals that there have been 249 investment deals in blockchain companies in China to date. In 2016, there had been 60 funding rounds, in 2017, nearly 100 and so far in 2018,68 have been registered in the first quarter.

By the end of March 2018, there were 456 Chinese blockchain companies in China, nearly double that of 2016 which ended with 256; the white paper notes: “The industry is developing rapidly with more and more entrepreneurs and capital entering the market.”

Of these companies, 295 focus on blockchain applications with 86 utilizing blockchain for financial services and 109 are giving their attention to applications in real economic sectors.

These new heights for blockchain investments and enterprise growth are setting 2018 up to be a favorable year for the industry; the exponential growth of blockchain related startups can be attributed to the growing trend of equity financing for blockchain ventures. The whitepaper reads: “Our blockchain industry is currently at a high-speed development phase – entrepreneurs and capital are pouring in, and the number of enterprises is rapidly increasing.”

It further notes an acceleration of blockchain application as a new round of business model changes is promoted, resulting in “cost reduction” and “improvement of efficiency”, leading to a formation of an “integrity industrial environment”.

Bans but a promising future ahead

The report comes shortly after the MIIT released its monthly public blockchain ratings index, which lists 28 blockchain platforms and the cryptocurrencies backing them; which from China, is somewhat contrary to their ICO and crypto-trading stance.

Domestic exchanges, cryptocurrency trading, and ICO related websites are blocked, despite China identifying blockchain as a vital part of the future and promoting investment in the technology.

The paper overview also details six trends in China’s blockchain industry that indicate an exciting future in the skeptical country, reading:

“Thirdly, the blockchain will be widely used in the real economy in the next three years, becoming an important support for the construction of digital China. The fourth is blockchains to create a new platform economy and open a new era of sharing economy.”


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