China has a long history of strict internal regulations and closed-door international trade. By their nature, blockchains negate international borders whether they be physical, political, or economical. This seems to directly contradict Chinese policies toward trade. One must wonder why the nation has become so enamored with innovating blockchain technology.
Approach to Economic Policy
The most apparent reason for Chinese interest is that blockchain applications can solve logistical and economic infrastructure problems. The continued success of new ventures in the crypto space is proving too great to ignore. On the other hand, there are looming questions about growing worldwide adoption of Bitcoin in restricting control of exchange rates. This is a practice that China is often accused of.
The profound opportunities that blockchain can offer have not altered the Chinese government’s commitment to its defining strategy. The Chinese Communist Party and the nation’s central bank both seek ways to evolve blockchain applications to meet their needs while retaining control over the measures that keep domestic stability in check.
Open vs. Closed Blockchains
There are philosophical reasons for adopting both open and closed digital ledgers. For instance, corporations use closed blockchains to streamline internal operations like logistics. The advantages of open blockchains like Bitcoin are what most people are familiar with. For China, the question becomes, can a closed blockchain philosophy be good for the nation over the long term.
Innovating and Adopting a New Blockchain Solution
China’s interest in blockchain is likely here to stay. It’s Supreme People’s Court has already moved forward by accepting the storage and authentication of legal evidence via blockchain. Other Chinese organizations are investing heavily into a viable fintech solution. Banking and payment settlement is actually where early developments in cryptocurrencies had the most influence.
The problem is that blockchains are naturally distributed. Any Chinese based blockchain would need to innovate a closed blockchain solution to keep the political status quo. This is a lot harder than it seems on the surface. Consider how convoluted it is to maintain China’s “Great Internet Firewall”. A comparable measure toward regulating cryptocurrencies has been compared to the complete isolation of the Internet. Such a drastic measure seems unlikely while blockchain benefits are extensive.