The most influential state-owned media agency in China, Xinhua, recently published an article titled, “Bitcoin: The First Successful Application Of Blockchain Technology”.
This impressive coverage comes as China plans to ramp up its efforts of financing blockchain-related developments in the country. According to recent reports, China will spend more than $2 billion on blockchain developments by 2023.
But as we get all excited about China’s new approach to bitcoin and blockchain, the nagging question remains: will the latest developments have a long-term effect on the price of bitcoin?
Bitcoin Is The First Successful Use Of Blockchain Technology
The state-run media outlet, Xinhua, published a report on November 11 terming bitcoin as the first successful application of blockchain technology. However, while this article is mainly positive as it provides general information about how bitcoin works, mining and how to conduct transactions, it also highlights the cliché narrative of bitcoin by most Western news outlets. The report cites that bitcoin’s most important use is “black market transactions and ‘darknet transactions”.
The article goes further to mention the high volatility argument against bitcoin since its not backed by “national sovereign credit”, unlike state fiat currencies.
Nonetheless, this article has led to widespread speculation as to whether China could soon ease bitcoin and crypto restrictions. Some watchers are however deeply skeptical, case in point, managing partner at JST Systems Louis J. D. Curran. According to Curran, the report is “hardly a ringing endorsement for #bitcoin”.
China To Invest Heavily In Blockchain Technology
Since the Jinping announcement, China seems set to take further steps towards the use of blockchain technology. The article published by Xinhua comes on the heels of another notable report by global data analysis firm International Data Corporation (IDC). IDC recently published a report noting that in the next four years, China will pursue massive blockchain-based developments. The Asian giant will spend approximately $2 billion, which translates to a compounded annual growth of at least 65.7 percent by 2023.
According to the report, in 2019, China’s main target for blockchain initiatives has been within the banking sector, presumably as it continues with the development of its own central bank-backed digital asset. But in the coming years, China is set to increase funding for blockchain innovations within other sectors such as manufacturing, professional services, and retail.
Will These Positive Developments Have A Huge Impact On Bitcoin Price?
The short answer is no.
In case you are late to the party, President Xi Jinping’s public endorsement of blockchain technology was followed by the passing of the cryptography law that will take effect from January 2020. However, shortly afterward, state-run media warned against cryptocurrency speculation, arguing that the country is only pursuing the technology underpinning crypto.
Nonetheless, it appears that China is gradually changing from its previous stern stance against cryptocurrency as it also recently excluded bitcoin mining from the list of activities it plans on eliminating.
While these positive developments in China are bringing very necessary legitimacy to an industry constantly associated with criminal activities and eclipsed by cyberattacks, it might not have a long-term impact on the price of bitcoin. This is because China is yet to lift the ban on cryptocurrency trading imposed in 2017.
Undeniably, there is a huge opportunity lost by not having the participation of China in the bitcoin market. China currently boasts a population of over 1.4 billion with many having little access to crypto. Now imagine the massive volume such a populous country would yield if the ban was lifted. Such a development would undoubtedly boost the price of bitcoin.