The Chinese state has chosen to embrace blockchain while trying to limit cryptocurrencies as much as possible, with state regulators seeking to make sure the average Chinese citizen has no access to cryptocurrencies, according to a Forbes report by Roger Huang. This has led to a strange world where the Chinese state censored posts against blockchain while the Chinese central bank voiced its will to “clamp down on cryptocurrency trading.”
It seems to be a strange contradiction at first: China is perfectly willing to embrace blockchains but not cryptocurrencies that are built on them.
It only makes sense when you realize that the Chinese state is afraid of cryptocurrencies because it is afraid of delegating control and power. It is afraid of the individual liberties cryptocurrencies represent: the idea of a check and balance on overwrought incumbents, whether they are centralized corporations or states.
The tenets that blockchain represents are those that appeal to China’s politicians, from President Xi Jinping onwards: control, end-to-end tracking, and digitization. By taking the paper currency supply of the yuan and creating a digitized version, the Chinese state is looking to create a layer of rich financial data – revealing what foodstuffs are consumed and what toys are bought, but also what bookstores are frequented, what travel plans are, and who supports what pro-reform or dissident magazines.
The degree of nominal decentralization of data in a blockchain versus a centralized datastore is a useful fiction for a state that likes to play between the boundaries of state-owned, state-financed and state-controlled enterprises to advance its united interests. Many agents sharing about the same goal: that is as apt to describe any Chinese state blockchain strategy as it is to describe the current state of Chinese state economics.
The ideas that cryptocurrency places to the fore run counter to China’s identity as a state: privacy, at least in pseudonymous form, from over-bearing states and others who collect intrusive data and the ability to transact freely with the world rather than tight capital controls.