Bitcoin Represents A New Form of ‘Centralization’, Says China’s IT Ministry Official

Although the nascent blockchain technology is growing in popularity in China, decentralization, blockchain’s hallmark, is considered as a taboo concept in this country as senior government officials always avoid mentioning the decentralized model that many blockchain-powered projects embrace in public.

Zhou Ping, director of China Electronics Standardisation Institute, the Ministry of Industry and Information Technology, told the Bund Summit on Fintech on Saturday that financial institutions are operating through its current completely centralized structure, and bitcoin represents another form of centralization.

He believes that real-world transactions are guaranteed on an institutional base and a technical base, which means all centralized structures are built on the basis of both laws and regulations and technology. However,  the arrival of blockchain technology shifts the centralized structure in the financial sector from the one that is dominated by regulations and assisted by technology to the one that is dominated by technology, with rules as the auxiliary.

“This argument is supported by data. For instance, the core technology of global public blockchains is in the hand of nearly 1,000 developers around the world. Another example is that 40% of the world’s bitcoins are held by just 1000 people. This is another form of centralization.” Zhou said.

The government official also pointed out three biggest hurdles faced by blockchain start-ups in China: First, an increasing number of ICO scams hamper growth of the industry. “The research of more than 100 blockchain projects leads to an interesting conclusion that a lot of entrepreneurs ‘make every effort’ to escape regulations to launch ICOs, which is one of the biggest obstacles for blockchain applications.” Zhou said.

Second, user’s expectations for the blockchain technology become too high. Technology is not the “cure” for “all diseases”, and it has certain inherent limitations.

Third,blockchain technology still has a long way to go before becoming an important infrastructure of digital economy in the future. Thus, Zhou recommended that regulators should create a comfortable environment for technology development.

After banning ICOs and shutting down cryptocurrency exchanges in September 2017,the Chinese yuan is used in less than 1% of global bitcoin trades, according to PBoC’s new data. And Chinese government still advocates a “centralized’ model in developing blockchain industry.

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