Chongqing’s Digital Asset Exchange Signals China’s Softening on Crypto

The Chinese city of Chengdu, in Chongqing province hinted at the possibility of government-sanctioned digital asset exchanges, paving the way for a possible lifting of the cryptocurrency ban.
The Chinese city of Chengdu, in Chongqing province hinted at the possibility of government-sanctioned digital asset exchanges, paving the way for a possible lifting of the cryptocurrency ban.

Hong Kong, CHINA – In the clearest sign yet that China is opening up to the possibility of a state-sanctioned cryptocurrency, the municipal government of Chongqing city, in eastern China openly mulled the formation of a “blockchain digital asset exchange.” Cryptocurrency trading has been banned in China, but there are growing signs that Beijing has developed sufficient safeguards to insulate itself from the vagaries of the digital assets whilst still exploiting it to power its economy. In recent times, state-owned media have even openly called for the lifting of a ban on Bitcoin, a bold move if not pre-sanctioned by Beijing.

Last Thursday, Chongqing’s Economy and Information Committee, an economic development agency under the Chongqing government, published five measures the city plans to take for the advancement of blockchain technology. Chinese President Xi Jinping has already highlighted the importance of blockchain technology to China’s “economic revolution” and billion of dollars from both private sector initiatives as well as the central government have poured into the space.

The stated purpose of the Chongqing initiative was to attract more specialized talent with increased funding and to build a blockchain ecosystem, but interestingly included “establishing a blockchain digital asset exchange.”

The phraseology of the initiative sent the Chinese cryptosphere into a tizzy, with Chinese crypto-advocates enthusiastically anticipating the possibility of a government-sanctioned cryptocurrency exchange. News of the possible cryptocurrency exchange blessed by s

With that wording, the effort was initially anticipated by the Chinese crypto community as being a government-backed cryptocurrency exchange, and was then spread like wildfire on Chinese social networking platform Weibo (the equivalent of Twitter).

Chinese President Xi Jinping, also general secretary of the Communist Party of China Central Committee and chairman of the Central Military Commission, addresses the opening of the 19th Meeting of the Academicians of the Chinese Academy of Sciences and the 14th Meeting of the Academicians of the Chinese Academy of Engineering, in Beijing, China, May 28, 2018.
Chinese President Xi Jinping, also general secretary of the Communist Party of China Central Committee and chairman of the Central Military Commission, addresses the opening of the 19th Meeting of the Academicians of the Chinese Academy of Sciences and the 14th Meeting of the Academicians of the Chinese Academy of Engineering, in Beijing, China, May 28, 2018.

Later last Thursday however, the initiative was quickly deleted from the committee’s website, with local news media speculating that Beijing suspended the blockchain project because it could potentially derail the current ban on cryptocurrency trading and initial coin offerings (ICO). If there was an objection from Beijing however, it did not last long, because early Friday morning, the Chongqing government’s official website republished the same proposed measures – including mention of the “blockchain digital asset exchange.”

A clarification issued from the Chongqing government later clarified that the “digital assets” may not be the same as ICO tokens or cryptocurrency, alluding to the platform being structured to facilitate the trading of “non-standard assets” which would be digitally recorded on the blockchain. The clarification also said that the platform would not be open to the public.

“Non-standard assets,” according to a definition by China’s Banking Regulatory Committee, refers to securities that can take the form of letters of credit, credit loans and other commercial paper, which are tradable among institutions, but not retail investors. Chinese banks have already put checks on the blockchain in an effort to reduce administrative costs and stem check fraud and less then a week ago, Chinese e-commerce giant JD.com announced it would be tokenizing asset-backed securities on the blockchain for trading.

But for hopeful Chinese crypto-advocates looking forward to the day when China lifts its ban on cryptocurrencies, that day may not be too far along. Although the nature of the cryptocurrency trading they envision may be somewhat far removed from the reality. Earlier, state-owned media, Global Times, went as far as to suggest that Bitcoin should not be banned, but cryptocurrencies regulated instead. Considering that Chinese firms and some of China’s brightest blockchain and cryptocurrency entrepreneurs are already participating in the crypto economy beyond the Great Wall, such an approach may not be altogether as far fetched as it seems.