China has introduced its blockchain national data infrastructure, a government-backed framework designed to integrate blockchain technology into various sectors for efficient data management and processing. This initiative is a vital component of the nation’s broader digital economy strategy and reflects its commitment to leveraging decentralized ledger technology (DLT) on a national scale. The complete implementation of this infrastructure is anticipated by 2029, marking a milestone in China’s technological advancements.
Permissioned Blockchain Model
Unlike popular public blockchains such as Bitcoin or Ethereum, China’s blockchain infrastructure operates on a permissioned model. While this system utilizes the core features of DLT, such as immutability and transparency, it is centrally controlled by government authorities. By establishing its own blockchain standards, China aims to encourage businesses to adopt solutions that align with this infrastructure, fostering a controlled yet decentralized environment.
The national data framework signifies a significant step toward mainstream DLT adoption, providing a structured approach for sectors to benefit from blockchain without relying on public, decentralized systems.
Blockchain Adoption Without Cryptocurrency
Although China is actively promoting blockchain technology, its approach to cryptocurrencies remains stringent. In 2021, the country imposed a ban on crypto trading and mining activities, citing potential risks to financial stability and concerns over high energy consumption. This divergence highlights China’s selective use of DLT, focusing on blockchain’s potential for innovation while maintaining strict control over digital currencies.
Stricter Rules for Crypto Transactions
China recently intensified its scrutiny of cryptocurrency-related activities by introducing new foreign exchange rules. According to a report by the South China Morning Post on December 31, 2024, the State Administration of Foreign Exchange mandated banks to monitor and report risky foreign exchange transactions. These include underground banking operations, cross-border gambling, and illegal financial activities involving cryptocurrencies.
Banks are now required to track transactions by analyzing the identities of individuals and institutions, the origin of funds, and trading frequency. Institutions identified as engaging in suspicious activities will face restricted services under newly implemented risk-control measures.
Balancing Innovation and Control
China’s blockchain initiative represents a calculated approach to integrating cutting-edge technology while safeguarding its financial and economic systems. By fostering blockchain adoption through a centralized framework and simultaneously tightening regulations on cryptocurrency, the nation is setting a distinct precedent for how decentralized technologies can coexist with strict governmental oversight. This dual strategy may shape the future of blockchain and crypto regulation globally, positioning China as a leader in the digital economy.