Investigation into Shanghai Blockchain Summit: National Crackdown or Simple Misunderstanding?
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The Global Blockchain Summit (全球区块链峰会) was held recently in Shanghai China. It was attended by more than 2000 participants and more than 35 startups opened booths to demonstrate their technology and financial products. While the summit appeared to be a success, it was interrupted last night because of a surprise check by the Pudong District Market Authority. The spot-check resulted in the formal investigation of a company under suspicion of pyramid selling. The company involved claims to be a “decentralised platform for smart properties and digital identities”. Such action is likely to stoke fears of impending crackdowns or other Draconian measures targeted at cryptocurrencies, Blockchain technology and financial innovation in China. That reaction would, in our view, be too quick. In particular, it is far from obvious that this action is reflective of the national govenment’s position on financial technology. As LakeBanker is currently running a Token Sale and we are a spinoff of LakeBTC — a leading cryptocurrency exchange headquartered in Shanghai, China — we feel it is important to present our stance on this issue.
The Chinese central government supports cryptocurrencies, Blockchain technology and associated financial innovations. In particular, the most recent official statement relating to cryptocurrencies was made on December 5th 2013. There it is stated that “Bitcoin is a type of commodity” and that “ordinary people have the freedom to participate in trading it”. Further, in a recent article, Yao Qian, Director of the People’s Bank of China (PBoC) Digital Currency Research Institute, recommended a regulatory sandbox policy for ICO; that is, a safe innovation space for ICO projects to work without becoming overburdened with concern for regulatory consequences.
If the Chinese government is so friendly to cryptocurrencies and financial innovation, why are they conducting surprise checks and investigations at Blockchain events?
In our view, what happened was an understandable disconnect between the national government’s policy on financial innovation and the local government’s push to combat financial and other serious crime. China very recently embarked upon a 3 month crackdown on pyramid schemes, which have expanded widely through social networks in recent years. The crackdown appears to have been triggered by the sad death of a university graduate in Tianjing who was duped into a pyramid scheme. The individuals behind such schemes have been connected with organised crime and incidents of more serious crimes including murder.
Given the pressure on local authorities to generate results in the campaign against pyramid schemes and related organised crime, misunderstandings can easily happen in cases of large gatherings where people are selling finance related products.
If our interpretation is correct, stakeholders in financial innovation in China have little to worry about. The pressure to generate results in the fight against financial crime along with the opacity of Blockchain innovation to some local authorities might produce one or two isolated mistakes but, given the central government’s overall attitude to financial innovation, including ICO, such mistakes are likely to be rare and quickly corrected. The Chinese government is doing its job: they go after the bad guys and give the good guys some space to work and to make progress. Genuine fintech startups in China have no cause for concern.
For a more detailed account of the Chinese national government’s attitude towards cryptocurrencies and financial innovation, including ICO, please see the following article:
