| Welcome to Chain Letter! Great to have you. Here’s what’s new in the world of blockchains and cryptocurrencies. | For China, it’s “blockchain,” not Bitcoin. China has just reinforced how serious it is about blockchains. But what the nation’s government wants to do with the technology is a far cry from the goals espoused by digital currency systems like Bitcoin.
The latest blockchain hype session began at the highest level of power. Speaking at a government meeting late last week, China’s president, Xi Jinping, called on the nation to “seize the opportunity” and take a “leading position” in the development of blockchain technology, according to Chinese state media. Over the weekend, it was reported that China’s government passed a new law to address certain regulatory and legal issues related to cryptography, an essential aspect of blockchain systems. Early this week, Reuters reported that while speaking at a forum in Shanghai, Li Wei, head of the People’s Bank of China’s technology department, had urged commercial banks to step up their application of blockchains to finance.
China’s affection for blockchains is not new. Its central bank has been studying digital currency and blockchain technology since 2014. In 2017, it said it would emphasize blockchain development as part of a five-year plan. Big technology companies Tencent and Alibaba are working on blockchain platforms, and the central bank has said it is nearly ready to launch a digital currency.
But the government, unsurprisingly, is not a fan of the feature that many cryptocurrency enthusiasts would say is actually the technology’s essence: the decentralization of power. Although China is home to a large portion of the world’s Bitcoin miners, it appears generally opposed to such public blockchain systems, which allow people to participate in the network, and help maintain the shared accounting ledger, without identifying themselves. The government has banned ICOs and cryptocurrency exchanging, and has even hinted at plans to crack down on Bitcoin mining. In January, China’s internet censorship agency approved new regulations requiring that all “entities or nodes” providing “blockchain information services” register with the government and collect identifying information about their users. (More than 500 projects have registered, reports CoinDesk.) In the eyes of many cryptocurrency enthusiasts, at least in the West, this type of top-down control is anathema to the idea of a blockchain system. Nonetheless, China apparently sees the technology as an opportunity to keep close track of its citizens’ spending and gain more control over those transactions. As Aaron Wright, a law professor at Cardozo School of Law, noted on Twitter, what China seems to want with blockchain technology is a “a great paywall” to go along with its Great Firewall. | | The digital renminbi vs. Libra (and the US): Huang Qifan, a prominent politician and vice chairman of the China Center for International Economic Exchanges, a think tank in Beijing, made waves this week when he said at a financial conference in Shanghai that Facebook’s proposed digital currency, Libra, is “delusional.” Huang said currencies should be left to central banks, and that China’s will be the first in the world to issue digital money, according to the South China Morning Post
In the digital age, systems for cross-border payments should be reshaped, Huang argued. In particular, he said sending the Chinese renminbi across borders is too dependent on two systems (the Society for Worldwide Interbank Telecommunication, or SWIFT, and the Clearing House Interbank Payments System, or CHIPS) that he called tools of US geopolitical power.
“Swift and CHIPS are gradually becoming the financial instruments for the United States to exercise global hegemony and carry out long-arm jurisdiction,” Huang said. “Historically, the United States has launched several financial wars with the help of the Swift and CHIPS systems. There is a certain risk associated with a high degree of reliance on them.” Related ICYMI: Critics say Facebook’s Libra threatens America’s power. Zuck says they’ve got it all wrong. (TR) | | Loose change Fill your pockets with these newsy tidbits. - Industry figures say Beijing’s blockchain push could tip the scales in a global race to achieve “blockchain supremacy.” (Reuters)
- The US SEC has given the go-ahead to three major stock brokerages to clear trades using a distributed ledger platform developed by startup Paxos. (Fortune)
- Bakkt, the digital asset exchange and custody provider owned by the same company that owns the New York Stock Exchange, plans to launch a consumer app that can be used to buy goods and services with cryptocurrency. (CoinDesk)
- Argentina’s central bank will prohibit citizens from exchanging their pesos for more than $200 a month, down from the previous limit of $10,000 per month. High inflation means consumers are looking for other ways to save, so the country’s many new cryptocurrency startups are hoping they turn to digital currency. (The Block) +The cryptocurrency startups trying to save Argentina from itself. (TR)
- Changpeng Zhao, CEO of Binance, the world’s most popular crypto exchange, is planning an aggressive expansion into Russia. He has called it the company’s “key market.” (CoinDesk)
- Chinese crypto mining hardware company Bitmain, the world’s largest maker of mining chips, has filed for an IPO in the US, according to a local report. (Finance Magnates)
- Canaan, the world’s second-largest maker of mining chips, which is also based in China, has also filed for a US IPO. (Bloomberg)
- A lobby group that represents 200 commercial banks in Germany has called for a digital euro, “so that the global financial architecture does not lead to a polarisation between American or Chinese solutions.” (The Block)
| | “Hell no.” —Twitter CEO Jack Dorsey, when asked at a company-sponsored event in New York whether Twitter would join the Libra Association. Dorsey, who also suggested that Libra shouldn’t even be called a cryptocurrency, has long been an advocate of Bitcoin. (Decrypt). | | | | | |
