Last week, Chinese President Xi Jinping gave a speech where he praised the blockchain technology many crypto assets are built on and urged his country to ensure it is at the forefront of future developments in the space.
Bitcoin and other Chinese altcoins pumped on the news, with Bitcoin setting it’s third-largest one day gain in the crypto asset’s history. However, news that China is entering the blockchain arena may ultimately spell bad news for cryptocurrencies like Bitcoin and others.
China’s Nod of Support For Blockchain Causes Crypto Markets To Surge
Bitcoin started the week trading at a low of $7,300, but following news that Chinese President Xi Jinping spoke out in support of blockchain – the technology underpinning Bitcoin and many other crypto assets – Bitcoin price spiked over 40% setting its third-largest one day gain in the asset’s short history.
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In the following days, other Chinese altcoins also pumped, with Tron, NEO, and VeChain all rising by over 30%. Bytom, another Chinese crypto project, pumped over 300% from low to high before retracing.
Why Chinese Support of Blockchain Is Bad for Bitcoin
Pundits of cryptocurrencies argue that it’s blockchain, not Bitcoin, that is the truly transformative technology. It’s worth noting, that Chinese President Xi Jinping’s comments were in support of blockchain, and not cryptocurrencies.
Given China’s track record for censorship and control, the country has little motivation or reason to bring Bitcoin or other existing, decentralized cryptocurrencies into its financial landscape, and The People’s Bank of China is instead focusing on the development of what is being called DCEP or digital currency electronic payment.
🇨🇳 BREAKING: China to launch digital currency “DCEP” According to this video (to be confirmed), Chinese Central Bank will launch digital currency called DCEP. To be tested and onboarded with commercial banks first. More on this story soon. — Block Journal (@blockjournal)
Following Xi’s statements this week, it was revealed at the Inaugural Bund Financial Summit of 2019 in Shanghai that after 5-6 years of development, , with the digital currency first being tested and rolled out with commercial banks in the region.
China’s motivations are clear when it comes to blockchain: they plan to utilize the technology to develop their own, censorable digital currency, likely to further tighten the strict control over the country’s citizens.
Once China’s DCEP is fully deployed, more stringent control over crypto assets could soon follow to ensure there’s no opposition to the digital currency. China has already taken major steps to censor the internet as a means to control the flow of information from reaching its citizens.
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China also plans to introduce a social credit system in the future that assigns a score to citizens depending on their online and real life behaviors. The DCEP could be intertwined with the country’s social credit system, and internet censorship, and the country could theoretically penalize behaviors through their finances as a result.
So while crypto investors high on the recent pump may be signing the praises of China for their support of blockchain, that support may ultimately be a negative thing for the overall crypto space.