Cryptocurrency

China's Crypto Panorama: How CBDCs Pushed Blockchain Adoption in 2020

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2020 was a year of challenges for the world, but for a country like China, with such a large population base and rapid development, it was also a year of opportunity.

On October 24, 2019, China officially made its blockchain technology a national strategic priority. A year later, the development of the Chinese blockchain industry led the world in many ways.

The number of disclosed blockchain projects is highest in China

According to a research report from Gyro Research, a Chinese blockchain media company, the number of global blockchain projects declined from October 24, 2019 to September 1, 2020. Around 345 new blockchain projects were announced worldwide – a decrease of 163 compared to the same period last year. China ranks first with 252 projects, which is about 73% of the world and up 12% year over year, and its number of use cases is well above the US, which ranks second at 27.

It is now clear that China's blockchain policy plays an important role in this area. The increasing number of projects peaked after the guideline was published. Of the 252 projects, 56 were added in November 2019 after the guideline was published, and 48 were announced in December 2019. After that, the number of projects gradually decreased.

From the point of view of regional distribution, Beijing, Shanghai, Shenzhen, Zhejiang and Guangdong are the five most important Chinese provinces that actively promote the implementation of the blockchain. According to the incomplete statistics from Gyro Research, technology projects are mostly focused on government affairs, public services and finance.

In addition, some public companies such as Tencent, JD.com, Xiaomi, Huawei, Baidu, etc. are actively promoting the design and adoption of blockchain technology. Claude Jiang, General Manager of Xiaomi Digital Fintech, spoke to Cointelegraph about the status of the blockchain rollout this year and the plan for next year:

“This year, we have already launched state industrial and financial platforms in Tianjin, Chongqing, Guangzhou, Ningbo, etc. and manufactured a large number of innovative industry-wide financing products based on blockchain technology. Based on these products, the industrial structure will be innovatively supported by the industry in the next year so that the industry can use blockchain and other technical functions to carry out digital and intelligent upgrades. "

Blockchain-based service network promotes blockchain adoption in China

On April 25, the “Blockchain-based Service Network” [BSN] blockchain platform was used commercially worldwide by the State Information Center, a Chinese government institution.

According to its official introduction, the BSN is a cloud, portal and framework-global infrastructure network with which all types of blockchain-based decentralized applications are provided and operated. It will be the only global infrastructure network that is independently innovated and access-controlled from China.

One of the biggest barriers to implementing blockchain technology is the cost of building a platform. There are many blockchain platforms out there and the same data island problem may arise in the future as with the traditional internet. The BSN ecosystem currently includes the underlying architects, developers, cloud service providers, portal providers and operating and maintenance companies. The ultimate goal of the BSN is to become an internet that unifies the fragmented blockchain market.

So far, 136 public city nodes have been used in the BSN. Among them, 98 are already connected Chinese nodes, 30 are under construction and 8 are overseas. In terms of the network, there are four alliance chains, 12 public chains and two cross chains. Cloud service providers include China Mobile, China Telecom, China Unicom, Baidu Cloud, and Microsoft Azure. Twelve well-known public chains have been integrated, including Ethereum, Tezos, EOS, Solana, Algorand, Polkadot, Nervos, Neo, IRISnet, ShareRing, Bityuan and Oasis.

Reviewing the BSN's achievements in 2020, Yifan He, CEO of Red Date Technology – the BSN's operational unit – told Cointelegraph:

“Next year, China's blockchain industry will flourish. However, as blockchain technology is still in its early stages and we are not only vigorously promoting the possible applications, we also hope that more companies will follow suit and participate in the infrastructure and underlying technology. Next year will be the first year of the central bank's digital currency, which will be one of the main driving forces behind the development of the blockchain industry. I also hope that companies in the industry will pay more attention and have discussions. "

China's DCEP: From Theory to Practice

On December 12, Suzhou, one of the four pilot cities for China's electronic payment in digital currency [DCEP] – also known as digital yuan – officially launched the project by giving away digital red envelopes for yuan. Four payment scenarios were implemented, including dual offline payment, offline payment, online payment and cash on delivery.

It was in 2014 that Zhou Xiaochuan, then governor of the People's Bank of China, proposed the idea of ​​building a digital currency. The central bank also established the world's first official institution dedicated to legal research and development of digital currencies, the Digital Currency Research Institute.

After six years of research and repeated practice, the Department of Commerce announced on August 14 that the digital yuan would be piloted in 28 provinces and cities.

With the vast majority of Chinese residents already used to electronic payments through Alipay and WeChat, promoting the DCEP on a large scale could be fairly straightforward in the future. However, the introduction of the DCEP is unlikely to affect China's current electronic payment system. it will simply give the Chinese residents one more option. The DCEP's offline payments experience could lead Chinese and companies to pay more attention to blockchain technology, encourage more business research and blockchain adoption, and accelerate the development of the entire industry.

Regarding the development of China's DCEP in 2021 and in the future, Huobi University President Jianing Yu said:

“We can see from the current pilots that E-CNY's payment function was relatively complete. It can support both online and offline payment scenarios and even complete transactions without internet. But the real meaning of E-CNY is more than that. In the future, the use of E-CNY will extend to more retail scenarios and address the challenges of advanced technology. In the 5G era, driverless cars, Internet of Things devices, and industrial Internet will be rampant and the demand for transactions between things will continue to grow, but the current monetary and financial system cannot meet these future demands. In this situation, the RMB needs to be updated to accommodate these potential trade and finance requirements. "

He also said, "E-CNY is a kind of currency for the future. The digital era is the future, every asset including personal ID will be digitized. The popularization of E-CNY will accelerate the process of identity digitization and asset digitization Further expand the digital economy space. E-CNY will provide a brand new business opportunity and enable the transformation of "New Smart Business" in the future. "

Increased regulation by the Chinese government

On October 23, the People's Bank of China publicly solicited comments on a revised version of the People's Republic of China Law on the People's Bank of China. It is worth noting that the new "draft for comment" contains some provisions related to the digital currency.

This may be the first time China has included relevant provisions related to digital currencies within the scope of the law. On the one hand, the publication in the form of a draft comment confirms the legal status of the DCEP. On the other hand, this means that digital currencies in any other form are not legal in China.

As the U.S. Department of Justice and the Commodity Futures Trading Commission step up regulation of the crypto market, global regulation is stepping up too, and China is no exception. Regulations have evolved for some digital currency exchanges registered overseas while operating in China.

China is one of the fastest countries when it comes to adopting new technologies. Chinese consumers are more likely to accept new technology, and this willingness can give China an edge. The significant population and internet user base, the popularization of mobile internet and payments, a large number of talented developers, and government support for the adoption of technologies are all factors that can contribute to the advancement of China's blockchain industry.

In 2020 in particular, while the pandemic continues, the government's call for the introduction of blockchain technology in public services such as medical care, charity, epidemic prevention and traceability is much more urgent, which to some extent promoted the development of the Chinese blockchain industry Has.

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Melinda Martin