December 2, 2023

Financial geography: China's great cryptoplan

Financial Geography: China's Great Crypto Plan"/>
The Great Crypto Plan of China

The country with the largest population, which ranks third in areaand has one of the largest gold and foreign exchange reservesin the world, is intensively developing the cryptocurrency industry. Potential superpower – China, whose economy is second only to the United States, believes that cryptocurrencies – it is a valuable asset that can provide a “safe haven” for investment and attract foreign investment. 

In China, not only is there a huge amountmining farms, miners, traders and one of the main crypto-exchange markets, but the policy itself is aimed at intensive development of technology. After the approval of blockchain by the President of the People's Republic of China, Xi Jinping, there was a massive growth in the stock market, the launch of hundreds of new projects began, and the Central Bank of the People's Republic of China set a course to accelerate the launch of its own digital currency.  

National cryptocurrency — weapons against the USA

According to analysts, hurry up with the launchChina decided to develop its own digital currency precisely because of the new turn of the confrontation in the trade war with America. Donald Trump announced tougher tariffs on Chinese imports, thereby pushing foreign investors to look for ways to channel funds out of the yuan into more reliable assets – gold, other currencies and Bitcoin. By launching its own cryptocurrency by the central bank (DCEP), China intends to trade with other sanctioned countries, thereby reducing financial losses from the trade war. 

The government is working to createnational digital asset since last year. Bloomberg reports that while the exact date for DCEP's release to markets is unknown, the People's Bank of China has said it is close to launch. This should help strengthen the international position and global use of the yuan, and is also associated with the state’s attempt to take control of the cryptocurrency market. On January 1, 2020, the adopted Chinese Cryptography Law will come into force, which aims to regulate commercial cryptocurrency transactions in accordance with established standards, minimizing possible financial and legal risks.   

China's fear of Libra

For China, the Facebook Libra project has provided moreone motive for accelerating the digitization of the national currency. Chinese authorities see Libra as the potential start of a new global financial system that could disrupt the traditional order of government and central banks. At the China Finance 40 Forum, a senior official from China's central bank, Mu Changchun, commented:  

“If Libra is accepted by everyone and becomeswidely used payment instrument, then after some time it is quite possible that the project will turn into a global, super-sovereign currency. We need to plan ahead to protect our monetary sovereignty”. 

He also noted that DCEP will be similar toLibra – will be as secure as central bank-issued paper notes and can be used on platforms such as Tencent's WeChat, even without an Internet connection. It is worth noting that the Facebook Libra cryptocurrency will be backed by a basket of fiat money, which should ensure its stability and reliability, unlike other tokens. Facebook says Stableblock is designed to allow people to securely store and make payments without the need for bank cards around the world. 

Although at the moment the US authorities are not sure aboutThe security of the Libra project and the release of a stablecoin in the summer of 2020 were under threat, and there is an unspoken struggle between the PRC and Facebook. Following the official announcement of the Libra project, China said it would intensify its efforts to create its own cryptocurrency. Implementation of DCEP – China's ambitious response to the release of the cryptocurrency of the social network Facebook.  

Over 500 new blockchain projects

Since President Xi Jinping has decisivelyapproved blockchain technology and encouraged his compatriots to take advantage of all the opportunities in the field of distributed ledger, a lot of new Chinese corporate blockchain projects opened. The Cyberspace Administration of China, where all blockchain projects must be registered, has published the 506 currently available. These include financial services industries such as asset management, trading, cross-border payments and supply chains. Banks also applied for 14 blockchain projects. Including large private companies. 

Chinese search engine giant Baidu has releasedXuper Chain blockchain network to provide basic service infrastructure, decentralized application, Letsdog, similar to CryptoKitties, cloud service – Baidu Blockchain Engine and Token Service to protect intellectual property rights of digital content. Alibaba Group, investment holding Tencent and Internet conglomerate Huawei constantly compete with Baidu. Alibaba has been particularly active, leading a total of 100 blockchain projects. Tencent, which created the WeChat messaging app, is creating a suite of blockchain services like Tencent Blockchain and Tencent Cloud TBaaS Blockchain. Its TrustSQL platform is a three-component system designed for digital asset management and authentication. 

The Chinese government is also actively involved in many major listed projects, from communications highways to innovations in legal and land use cases. 

Global mining giant 

It is in China that the majority of companies are located.production of video cards and ASICs, and also has an impressively low cost of electricity. Thus, local miners can purchase the necessary  components of cryptocurrency mining at a much lower price than anywhere else in the world. Examples of giant mining farms are: the provinces of Liaoning, Xinjiang, Inner Mongolia and Yunnan. The capital of cryptocurrency mining is the province – Sichuan – It is on its territory that about 70% of all bitcoins are mined. 

Against the background of the speech of Chinese President Xi Jinping,as well as the adoption of the law on cryptography, one of the Sichuan officials advocated the support and active development of mining in the territory entrusted to him. The Chinese government's decision to stimulate industrial-scale cryptocurrency mining led to discounts on electricity and the creation of the world's largest mining center in China.   

So, we see that China is actively usingblockchain to fight the US and President Xi Jinping sees this technology as an integral part of the country's plan to become a superpower. The Land of the Rising Sun also adopted a law to regulate the use of cryptocurrencies. The state funds research, launches a digital national currency and supports mining. 

It is worth noting that the blockchain will playa key role in many sectors in the future, including digital finance, Internet of Things, artificial intelligence and 5G. All of China's moves towards blockchain could make China's large bureaucracy even stronger. Active policies and enormous enthusiasm in the field of cryptocurrencies give reason to expect a major technological breakthrough in blockchain innovation from China.