China Tries to Dampen Blockchain Euphoria

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China has tried to dampen the sudden euphoria caused by president Xi Jinping personally endorsing blockchain technology. As a result of Jinping’s statement last week, several Chinese-based cryptocurrencies saw huge gains, as did Bitcoin, while the share prices of almost 200 companies invested in blockchain technology jumped around 8% on Monday, some even reaching their daily limit of 10%. Chinese state-run news agency Xinhua has now called for calm amid the flurry of excitement, asking companies to keep official statements factual and avoid hype, according to CNN Business in Hong Kong.

China Attempts to Douse the Blockchain Fire

According to CNN, a commentary published by the People’s Daily, the Communist Party’s official mouthpiece, called for Chinese traders and investors to rein in their exuberance and act more rationally:

Of course the future of blockchain is here but we must stay rational. Blockchain innovation does not mean speculating virtual currencies … We must also see that the blockchain is still in the early stages of development.

As a result of this communication, the stocks in East Money Information’s blockchain index declined nearly 3% on Wednesday after two days of growth. Similarly, Chinese tokens such as NEO, BTM, and QTUM have seen pullbacks after their huge gains since Friday, and it remains to be seen how many, if any, hold their value, or this was simply a chance for bagholders to unload.

CZ Says Blockchain Race is “Real”

The subject of China was, understandably, a major talking point with Binance CEO Changpeng Zhao who hosted an AMA on Twitter overnight. Zhao stated his belief that many projects had been in “silent development mode” and would now be “coming out of the closet” as a result of the announcement, but doubted the wisdom of promoting blockchain as a concept without also embracing cryptocurrencies, in particular Bitcoin:

I doubt that will work too well, to be honest. I don’t understand how you can have a blockchain without a cryptocurrency. Without the incentives and network fees, blockchains don’t get a lot of adoption. Without the widespread adoption, you don’t get the effect of a trustless network.

Of course, no one ever said that China had designs on making their networks trustless, with many in fact assuming the opposite to be more accurate – that China will in fact use blockchain technology as a further surveillance tool for the state. Zhao also warned that countries not planning on adopting blockchain with the same zeal as China were “in real danger of being left behind”, stating there now exists a “race” to blockchain adoption. There have been suggestions that China’s sudden push for blockchain, as well as their imminent Digital Currency Electronic Payments (DCEP) system, would soften American attitudes towards Facebook’s Libra token, but there is no suggestion yet that that is the case.