China’s Embrace of Blockchain Doused by Growing “Black” Tech Market

The recent release of technology bluebooks has thrown a spanner in the works for those mixing Chinese government’s interest in blockchain with cryptocurrencies and digital assets. The books’ release, as reported by CCTV, points to how technology has brought more convenience to people in China and yet triggered many new forms of crime. This may explain the renewed crackdown by the Chinese authorities on crypto projects of late, cutting short the excitement spurred by Chinese premiere’s recent good words for blockchain.

“The speech by President Xi Jingpin that mentioned blockchain as a core technology is definitely a gamechanger. Those of us active in blockchain industry in China have always known the support from government, even throughout the turbulent times in 2017,” says Malcolm Lerider, a former R&D Manager at NEO and having worked in China’s blockchain space for three years. “The government support has perhaps not been completely clear across decision makers in other industries, but now it hopefully is, and that opens up for technology innovation. However, it needs to be emphasized that this statement is to be interpreted as support for blockchain as a technology and nothing else. It does not change the stance towards crypto-tokens and crypto-exchanges.”

For Kevin Pao, a consultant for the Asian Blockchain Society and also at World Blockchain Business School, President Xi’s speech with the development of national team players and the exercise of regulations have contributed to improving China’s blockchain space.

Released jointly by some institutions including the Beijing Blockchain Technology Application Association, and under the guidance of the PBoC, the books put the Chinese financial, regulatory and blockchain technologies’ “black industry” market for online fraud at around Y110 bln (or over $15 bln).

This alarming claim is reportedly linked to cross-border MLM cybercrime, telecom network fraud and the emergence of new types of cybercrime. CCTV also notes that the crime market size is climbing to be China’s third-largest “black industry” and spreading. Regardless of China’s overall market, technology prowess and the government’s blockchain-friendliness, that cybercrime is increasing raises issues of risk prevention that may affect many projects’ access to opportunities.

“There are good firms that may be consulted to ensure that your company have a strong technical defense and proper policies and procedures to prevent cybercrime,” says Lerider, who maintains that companies that provide consortium blockchain solutions will have more than enough opportunities in China, but the situation for public blockchain platforms does not change much, perhaps not at all.

He adds: “Most cybercrimes actually occur through non-awareness among employees; clicking an unknown link in an email, or opening an unknown excel file in edit mode. One mistake by one employee could result in data breach. Employee training is therefore extremely important. Furthermore, blockchain development companies need to be upheld to the same standards as all other software development companies. They need to follow GDPR in Europe and the Cybersecurity Law in China. They must, of course, also have mature internal processes. While adherence to relevant laws needs to be monitored and enforced from supervisory body, clients need to have the awareness themselves to do proper due diligence before hiring a vendor. A good start is to confirm that the vendors follow good practice, for example certificated in ISO 9001 and ISO 27001.”

The growing momentum for blockchain in China may not essentially boost the chances of Asia-based blockchain projects (e.g. NEO, Bytom, etc) over other public blockchains like Ethereum, adds Pao, but it will “strengthen people’s confidence on development of blockchain technology while the regulation of digital currency market continues.

“You know issuing digital currency is not allowed in mainland China, right?” Pao asks. “Many blockchain companies and exchanges register their business overseas but still actively do business in China. After President Xi’s speech, the government has been carrying out (a) kind of clearance act.”

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