Chinese Media Outlets Issue a Stern Warning About the Blockchain Frenzy
- A rising number of companies in China are claiming to be related to blockchain technology.
- Multiple media outlets have issue warnings to put an end to the frenzy.
- The Chinese government vows for blockchain, not cryptos.
Following Chinese President Xi Jinping’s decision to “accelerate the development of blockchain technology,” a massive number of companies in the nation claimed to have shifted their focus towards blockchain. The move was seen as a way to improve brand awareness, generate buzz, and subsequently drive their stock prices. Now, several media outlets have issued warnings to combat the madness.
Speculating on Blockchain Technology
Xinhua News Agency, the official state-run press agency in China, recently published a report warning investors about the resurgence of businesses speculating on blockchain technology, which seems to be correlated with President Xi’s endorsement.
In the publication, Xinhua said that 500 out of the “3,000-strong listed” firms in China are claiming to be adopting blockchain technology. However, only 40 companies have been able to back up their claims with full disclosure of their business model.
As more businesses begin to operate under the disguise of blockchain technology, Chinese regulators are stepping up their efforts to put an end to the frenzy. The People’s Bank of China and Shanghai’s financial regulator issued a co-signed statement encouraging local government agencies to supervise companies that have made blockchain-related statements.
Dong Shaopeng, an adviser for the China Securities Regulatory Commission, told the Global Times that companies must divulge whether they are pivoting into blockchain technology to avoid further repercussions.
Companies could face reprimands from the stock exchange, fines, and barred from market access for those whose statements are found to be untrue.
Blockchain is not a “Cash Chain”
Xinhua is not alone in warning about blockchain madness. Focus Report, one of China’s most prominent news programs, released a full episode dedicated to the rising levels of fraud in the nation’s blockchain sector.
Dubbed Blockchain is not a “Cash Chain;” the television report affirmed that there are currently 32,000 blockchain companies registered in China. Nevertheless, less than 10% of those firms are actually involved in the emerging technological field.
Data from China’s National Internet Emergency Center (CNCERT) revealed that 755 cryptocurrencies in the market are not part of an actual project, and their market value plunged to zero after inception. Over 102 cryptocurrencies are part of a pyramid scheme.
According to Wu Zhen, head of the Key Laboratory of Internet Financial Security Technology of the National Internet Emergency Center,
The main feature of the return-to-zero currency is that it has experienced a sharp decline in market value. The original price is relatively high. Now it may fall to less than one percent of the original. We call it zero-return coin; the second one is called a pyramid currency. The actual pyramid currency has little to do with the blockchain, just borrowing the blockchain hype to scam.
The recent developments coming from China indicate that the nation is primarily interested in blockchain technology and not cryptocurrencies. Even though crypto mining will be kept alive in the country, it seems like Xi’s administration has no intent to embrace any public open cryptocurrency as the nation’s expenditure on blockchain technology is set to reach over $2 billion by 2023.
Part of the reasons could be the shocking levels of illiquidity in the industry. Willy Woo, a partner at Adaptive Capital, recently stated that 4,938 out of the 4,978 tokens on CoinMarketCap are illiquid. Woo inferred that 40, or less than 1% of all the cryptocurrencies listed on CoinMarketCap, provide “ease of converting them to cash.”
Editor’s note (11/19/2019 @ 14:25) : The article has been updated for clarity.
This article was edited by Sam Bourgi.
Last modified: November 19, 2019 17:06 UTC