Industrial blockchain emerges under high regulatory pressure in the “cryptocurrency” world

Is there an endogenous relationship between the two? Will the industrial blockchain emerge from the blood bath and fury of the cryptocurrency circle?

Industrial blockchain emerges under high regulatory pressure in the "cryptocurrency" world

On May 18, China Internet Finance Association, China Banking Association and China Payment Clearing Association jointly issued industry self-regulatory rules “Joint Announcement on Preventing the Risk of Speculation in Virtual Currency Transactions”, specifying that relevant member institutions shall not carry out business related to virtual currency. On the evening of a single day, the Resource Conservation and Environmental Protection Division of the Inner Mongolia Development and Reform Commission issued a notice on accepting reports on virtual currency mining enterprises, setting up a reporting platform for virtual currency “mining” enterprises. While the industry was speculating on the direction of subsequent regulation, three days later, the Financial Stability Development Committee of the State Council held its fifty-first meeting and explicitly proposed to crack down on bitcoin mining and trading, causing an uproar in the market and a strong one-day dive in cryptocurrencies, led by bitcoin, with significant fluctuations.

Shortly after, Inner Mongolia took the lead in issuing a ban on mining announcements, and Sichuan also began holding talks for bitcoin mining. It is no coincidence that mainstream newspapers such as CCTV Finance, Xinhua News Agency, Securities Daily and People’s Daily have issued statements to expose the chaos of virtual currencies, and the regulatory opinion of the cryptocurrency circle continues to be high pressure.

On the other hand, the industrial blockchain has been frequently reported in recent months, and the policy support continues to expand. Recently, industrial blockchain enterprises such as Fun Chain, Cloud Elephant and Pure White Matrix have been gaining financing in the capital market, and many people in the market believe that under the heavy pressure of the regulation of the cryptocurrency circle, the industrial blockchain will usher in the next wave of wind. So is there an endogenous relationship between the two? Will the industrial blockchain be born in a nirvana amidst the blood bath and fury of the cryptocurrency circle?

Regulation is in a high pressure siege situation, and the market is in a state of flux

In fact, China is no stranger to the regulation of virtual currencies. As early as 2013, the People’s Bank of China and other five departments jointly issued the “Notice on Preventing the Risk of Bitcoin”, making it clear that bitcoin does not have monetary attributes such as legal compensation and compulsory, and is not really a currency, and that citizens’ related investments and transactions are not protected by law. in 2017, the central bank and other seven departments on preventing the risk of token issuance and financing announced that no organization or individual may illegally engage in token issuance and financing activities, all kinds of token issuance and financing activities should be stopped immediately, and organizations and individuals who have completed token issuance and financing should make arrangements such as liquidation.

Although regulation has been a long time coming, the State Council’s voice is still the highest level of virtual currency regulation to date, and mining is clearly included in the scope of the crackdown. After the State Council set the tone, the mining hub of Inner Mongolia quickly released “Eight Measures to Resolutely Combat and Punish Virtual Currency “Mining””, which is a comprehensive crackdown on mining enterprises in the region. The National Energy Administration’s Sichuan Supervision Office also held a research forum on virtual currency “mining” on June 2.

And looking around the world, in recent months, in addition to China’s release of bitcoin crackdown policy, Europe, the United States, Canada, India, Turkey and other regions have been released to promote cryptocurrency regulatory statements.

On May 19, cryptocurrencies took a collective dive, with bitcoin once falling below the $30,000 mark to $29,000, a 34% drop, and ethereum falling even further to $1,900, a maximum drop of 46% in 24 hours. The total amount of single-day burst was $7.006 billion, equivalent to about 46 billion yuan, setting a record for the largest single-day burst in the history of cryptocurrencies. As for mining companies, on the day following the introduction of eight policies in Inner Mongolia, two well-known mining companies in China, Bit Xiao Deer and Mars Cloud Mining, issued an announcement saying that they had blocked access to IPs within mainland China since the night of May 26. It is reported that, at present, Bitmainland, Bit Xiao Deer, Biddy (mining services under the Leibit mining pool) and other domestic mining companies have opened their plans to go abroad, as far as the status quo is concerned, miners will usher in a new round of tide at sea.

Regulatory reasons reveal themselves, mainstream media continues to expose the chaos in the cryptocurrency world

Perhaps in contrast to the policy, in recent days, CCTV Finance, Securities Daily, People’s Daily and other mainstream media continue to voice out, Xinhua News Agency even issued six investigation reports in 10 days, from mining to trading to financing, comprehensive exposure of the coin circle chaos. In the rounds of exposure, the reasons for regulation also gradually surfaced.

Most industry insiders believe this move is mainly to maintain the security and stability of China’s financial market. Since the end of 2020, the crypto digital asset market has led to a new round of bull market. The mainstream digital assets represented by bitcoin and ethereum kept breaking new highs, and bitcoin even once exceeded $64,800, rising to a record high. in April, animal coins led by dogcoin continued to soar, and the market FOMO sentiment was high, attracting many people outside the circle to participate in it, and the market volume was growing. However, as a kind of investment subject without physical support, the virtual currency market is highly volatile, and once the wind blows, the price plunges and tumbles are common, and because virtual currency exchanges ignore investment preferences and provide contracts and leverage for profit, individual investors are extremely vulnerable to fall into it and lose a staggering amount of money when their positions burst. According to a report by Xinhua News Agency, many unscrupulous elements take advantage of investors’ lack of knowledge about virtual currencies and profit-seeking psychology, registering shell companies to induce investors to buy and sell by manipulating worthless “air coins”, in order to make fraudulent money. What’s more, many trading platforms have moved their transactions to overseas platforms to engage in cross-border money laundering and evade foreign exchange regulation. According to the 2020 Digital Currency Anti-Money Laundering Report released by Pai Shield, the value of unregulated outbound virtual currencies reached $17.5 billion in 2020. In this context, in order to strengthen financial supervision and prevent the transmission of individual financial risks to society, China proposed to block virtual currencies, focusing on combating OTC over-the-counter trading and mining.

The second is the carbon peaking and carbon neutral requirements. China is the world’s largest energy consumer, but energy supply and demand are not equal. In order to avoid energy path dependence and to meet the objective requirements of China’s green ecological development, on September 22, 2020, President Xi declared at the 75th UN General Assembly general debate that China’s carbon dioxide emissions strive to peak by 2030, and strive to achieve carbon neutrality by 2060. The high energy consumption of Bitcoin has now become a global consensus, with global Bitcoin mining consuming approximately 149.37 billion kWh of electricity per year as of May 10, 2021, according to a study by the Centre for Alternative Finance Research at the University of Cambridge. And in terms of distribution, about 65.08% of bitcoin computing power is distributed in China, from which this State Council statement first added bitcoin mining to the crackdown.

At the same time, according to Xinhua’s field visits, some mining companies in China operate in violation of the law, packaging themselves as data centers, arithmetic research centers and other institutions to avoid inspection, and because mining companies mainly through virtual currency intermediary fees and transaction fees for a living, their income can naturally avoid tax agencies, forming a “high income, high power consumption, less tax” of the The abnormal situation. At present, China’s mining enterprises are mainly concentrated in Xinjiang, Inner Mongolia, Sichuan and other areas where electricity is abundant and cheap, while the “13th Five-Year Plan” period, Inner Mongolia’s “energy consumption double control” two indicators are ranked the bottom of the country, energy consumption indicators are also the main reason for the heavy attack on mining pools in Inner Mongolia. The main reason.

In addition, the global central bank’s focus on cryptocurrencies is also related to the maintenance of national monetary sovereignty. According to the December 2020 statistics in the research report on the official website of Deutsche Bank, in addition to the U.S. dollar, the yuan, the euro and the yen, 98% of the world’s national fiat currencies have been defeated by bitcoin in terms of liquidity. And in March 2021, the research report data shows that bitcoin’s liquidity has surpassed that of the Japanese yen. The high liquidity of Bitcoin eats into the liquidity space of national sovereign currencies, especially in the context of the current accelerating global digital currency process, and Bitcoin’s decentralized and de-government features also give global central banks a huge threat and impact.

Industrial Blockchain Shortcuts, but Short-Term Breakthroughs Still Difficult

On the other hand, in recent months, industrial blockchain has been reported frequently. In terms of policy, China has mentioned blockchain in a number of policies such as “Implementation Plan for Accelerating the Cultivation of New Consumption”, “Opinions on Establishing a Sound Mechanism for Realizing the Value of Ecological Products” and “Special Action Plan for Optimizing and Upgrading the Commodity Market (2021-2025)”, involving the General Office of the State Council, Development and Reform Commission, Ministry of Commerce and other high-level departments. And the capital market is the wind and move, in half a month first interesting chain announced the completion of hundreds of millions of dollars in Series C financing, followed by the number of Qin technology, pure white matrix followed, one of the blockchain infrastructure cloud image also announced the completion of more than 100 million yuan B round of financing led by Fosun Van a fund.

Does this mean that the money from the cryptocurrency defection flows into the industrial blockchain? Will there be more cryptocurrency companies engaging in industrial blockchain business? Industry insiders suggest that the actual relationship between the two is not very big. “Although there is an overlap between the coin circle and the industrial blockchain circle, it is not high. The industrial blockchain audience group is more of a traditional industrial group led by Internet majors and traditional giant enterprises, while the coin circle is a mixed bag of fish and dragons from all walks of life.”

By definition, the industrial blockchain audience refers to the people who focus on blockchain research and development, application, and even the underlying protocol of blockchain, with more emphasis on the underlying technology and practical applicability of blockchain, in order to develop blockchain technology in the industrial sector. On the other hand, the cryptocurrency circle emphasizes the issuance of various virtual currencies by blockchain technology, which can be used for financial fundraising or trading applications, and there is less overlap between the two in terms of definition.

Technically speaking, the industrial blockchain and the cryptocurrency circle are actually two sides of the same coin. The technical architecture of the cryptocurrency circle and the basic public chain can be used in the industrial blockchain, and there is a certain technical overlap between the two, for example, the public chain Polkadot, which has attracted much attention due to parallel chain auctions, has cross-chain technology at the forefront of the industry. Although China’s blockchain industry mainly focuses on the research and development of autonomous and controllable technologies mainly in the alliance chain, it also draws on and integrates more basic public chain technologies from abroad in the application of alliance chain research and development, such as the blockchain service network BSN has realized the integration of blockchain platforms and data centers such as Tezos, NEO, Nervos, Cosmos’ IRISnet, Ether and EOS.

In fact, this year, despite the importance of blockchain highlighted after the 2019 Central Political Bureau meeting and the new infrastructure set in 2020, industrial blockchain has also ushered in a new peak of development. 2020, the number of blockchain-related policies issued nationwide reached 198, an increase of 153.84% year-on-year, and the total number of blockchain projects landed in China reached 194, an increase of 102.8% year-on-year .

However, despite this, due to the late start and the limitations of technology, infrastructure and business application model, the progress of China’s industrial blockchain is still relatively slow overall. From the application of landing, according to public data statistics, as of 2021, China’s blockchain application landing projects are only 47, compared with the same period in 2020, a decrease of 90, a 65% year-on-year decrease. In terms of policy support, halfway through this year, there are about 38 blockchain-related policies in China, which is still quite a big gap compared with 198 policies in the whole year of last year.

The slow progress also means that the industry pattern is also relatively stable, and the leading companies all have the opportunity to break through. The industrial blockchain enterprises invested in this time are all technology-based enterprises with stable development momentum and leading industry. It has strong advantages in both technology and application, and has become a blockchain core technology unicorn with a valuation of 1 billion after financing. The number of users of its preservation network is over one million, with 75 million pieces of evidence and over 1,000 judicial cases in courts at all levels nationwide. ChainIDE, the blockchain integrated development environment of Pure White Matrix, is currently the world’s largest blockchain developer traffic portal. And from the point of view of the use of this financing, all four companies are used for technological breakthroughs and the expansion of their business map.

It can be seen that this investment and financing, or related to the inflow of industrial blockchain funds under the high pressure of cryptocurrency regulation, but more based on the strategic choice of the blockchain industry prospects. Despite the slow development this year, it is optimistic that China’s blockchain industry is still making steady progress in technology, regulation, application and infrastructure. Algorithm”, the infrastructure level national team is more frequent entry, the foreign exchange bureau cross-border blockchain financial services platform scenarios continue to increase, recently the Tianjin blockchain technology innovation center incubated “Haihe wisdom chain” officially released, the application of popular end of China Merchants Bank also recently announced the online blockchain portal. In the long run, the development of industrial blockchain is an inevitable trend under the cooperation of the government, industry organizations and enterprise personnel, but its development still needs some time, and it is difficult to achieve a rapid breakthrough in the short term.

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