China needs to “lay the regulatory groundwork for its rise as a future digital currency trendsetter”, according to an editorial, published Wednesday in the Global Times, a Chinese newspaper under the auspices of the People's Daily.
The author of the piece, Xiao Xin, argues that the People’s Republic needs to adopt a more proactive approach to regulating the cryptocurrency market. The author gives an example with the recently-launched criminal probe into cryptocurrency price manipulation by the US Department of Justice. Xiao argues that the move demonstrates the US’ “more proactive stance”, “which over time will contribute to digital currency sophistication in the world's largest economy”.
The Chinese authorities in September imposed a ban on initial coin offerings (ICOs) and domestic cryptocurrency exchanges. Xiao admits that it makes “good sense” for China to clamp down on crypto exchanges, given the highly-speculative nature of crypto trading, which makes Bitcoin and its peers potential “bubblemakers”. However, Xiao also believes that this approach is not without flaws.
“[F]encing off bitcoin exchanges can't effectively end bitcoin trade, and fears of a bitcoin bubble could leave China behind in the digital currency revolution,” he says.
Instead, Xiao thinks that China should consider rules and regulations that “can ensure the technological advance works in the economy's favor”.
“There's an increasing belief that just saying no to bitcoin won't be the eventual solution to the cryptocurrency issue,” Xiao writes. “A more fundamental approach would be to embrace the new technology without putting the country's financial system at stake”.
Chinese regulators have already indicated that they are looking into developing a more robust regulatory framework to foster blockchain innovation. Last month, Li Ming, director of the Blockchain Research Office at the standards institute under the auspices of China’s IT Ministry, said that the country had launched a dedicated working group to develop national blockchain standards by the end of next year.
Earlier this week, China’s president Xi Jinping pointed to blockchain as one of the technologies contributing for a “new generation of industrial revolution”.