The Supreme Court proposes to accelerate the socialist market economy “in the new era”. The Chinese central bank issued a blockchain standard for the world of finance.
China could soften the tone on Bitcoin after the Supreme Court and the main economic planning office issued guidelines on the legalization of Bitcoin and blockchain technology. The rules highlight that it is necessary to protect new types of virtual properties, which include “digital currencies”.
Agencies may be seeking to integrate cryptocurrencies like Bitcoin into strategies to improve the socialist market economy “in the new era.” A statement dated July 22nd mentions that the standards of judgment on property rights require clarification and unification.
The document highlights, without directly mentioning Bitcoin, that “new rights and interests such as digital currencies, online virtual property, and data” must receive stronger protection. Both the court and the planning office emphasized the deep application of so-called distributed ledger technology (DLT) or blockchain technology.
The Chinese Supreme Court does not state its opinion through a judgment or judicial instrument involving its enforcement. It is rather a particular point of view of two public organizations in the country.
The points of view of the court and the economic planning agency contrast with the decisions of the Chinese authorities, which restrict cryptocurrency trading and its promotion at all levels. However, both agree with the executive power regarding the use of blockchain technology, since the country is closely observing it as State policy.
Blockchain Technology in Finance
While the Supreme Court ruled on cryptocurrencies, the Central Bank of China released a new standard related to blockchain technology to promote its application in the local financial sphere. The protocol would apply to all financial institutions that conduct tests with distributed ledger technology.
The parameters indicate that it is necessary to comply with safety, performance, and technical guidelines. The standard includes assessments on privacy protection, smart contracts, software application, and hardware.
The new set of actions applies, among other organizations, to banks, securities, or asset brokers, payment processing firms, and companies for the management of investment funds.
China’s push towards adopting blockchain technology is much more apparent, compared to that of cryptocurrencies like Bitcoin. Regarding the first case, President Xi Jinping himself has been in favor of it. In October last year, the head of state announced that his country should take the lead in developing blockchain technology.
Regarding the second case, the actions taken by China seek to restrict the use of Bitcoin, and other cryptocurrencies. In November 2019, the People’s Bank of China (PBOC) in Shanghai published new rules to ban their use in that city. Even in September 2017, the Central Bank of China banned Initial Coin Offerings (ICO) as a financing mechanism for new projects.
The picture paradoxically contrasts with the processing power for Bitcoin mining. This is because multiple private pools in China accumulate around 65% of the total network hash rate.
By Alexander Salazar