The last couple of weeks have been pretty damaging for blockchain adoption. No one knows if the Chinese government’s ban on all ICOs is *temporary* (the cryptocurrency craze needs to cool), or *strategic* (would China like to have its own national blockchain system, not some foreign one that could eventually undermine the Communist Party’s rule)?
The other possibility is that the Chinese ban is going to be in place till there is a *global agreement* regarding how all cryptocurrencies and related financial mechanisms should be supervised.
Here is the thinking behind the Chinese move, according to Li Lihui, a senior official at the National Internet Finance Association of China and a former president of the Bank of China: Digital tokens, like bitcoin and ethereum, are stateless, do not have sovereign endorsement, and do not have a qualified issuing body or a country’s trust. Such tokens are not legal currencies. They should not even be spoken of as digital “currencies”. In addition, such tokens have been a tool for fund flows and investment deals that China considers illegal. In other words, China has now defined and institutionalised a distinction between digital currencies which may eventually be created by national authorities, and digital tokens such as bitcoin. Digital tokens should be banned, while digital currencies (created and supervised by national or global authorities) could be used for good, if there is the right global regulatory framework. Till the time that such a global regulatory framework is put in place, all blockchain activity in the financial sector should be halted. And it is accordingly being be brought to a halt in China by the end of this month. This is particularly significant, given that China has been hotter than almost any other country for blockchain activity.
So are we likely to get a global agreement regarding supervision of blockchains?
In my view, it is inevitable. And it will be agreed relatively quickly.
That will have the advantage of stabilising and embedding blockchain in global financial systems.
Simultaneously, the Chinese position removes the basis for the idealisation of blockchain by people who have anarchistic or libertarian illusions.