Official blockchain research gives hope to bitcoin in China

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A research center focusing on blockchain technology backed by the Chinese government was launched on Tuesday, suggesting official backing for cryptocurrencies despite an impending closure of the leading trading platforms in the country.

The Trusted Blockchain Open Lab, opened by the China Academy of Information and Communications Technology (CAICT), a research institution under the Ministry of Industry and Information Technology, comes ahead of the creation of a platform that will bring experts and blockchain firms together, according to Caixin.

The show of support for blockchain and fintech suggests that the recent spate of announced closures at some of China’s biggest trading platforms could be a temporary measure, as authorities look to work with industry experts to figure out how to regulate the technology while still recognizing its potential.

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Speaking at a blockchain conference on Tuesday, vice director of the People’s Bank of China's digital currency research institute Di Gang criticized the lack of focus on the technical side of the blockchain, saying "the number of business personnel exceeds technical personnel" at many blockchain conferences.

The complexity of blockchain and its ability to cross sectors has spawned illegal activity, warned Di, adding that the focus on making money from the technology was a global rather than Chinese phenomenon, saying "Wall Street talks more than Silicon Valley."

Chinese authorities banned ICOs (initial coin offerings) earlier this month, citing a lack of regulation and their use for fraud and other criminal activity. ICOs are a form of fundraising where companies offer investors exclusive "coins" for a stake in projects that typically involve blockchain technology.

Speaking at the same conference, Wang Suzhen, deputy secretary general of the Payment & Clearing Association of China (PCAC), said ICO "investors are not able to analyze the feasibility of a project" because they lack the technical understanding needed for blockchain. Wang added that the current block on ICOs would prevent further illegal fundraising.

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Commenting earlier this month after the ICO stoppage, Sun Guofeng, director general of the People's Bank of China's research institute, told the Financial Times that the ban "should not prevent relevant financial technology companies, industry bodies and other technology firms from continuing their research into blockchain technology," describing blockchain as "a good technology."

Bitcoin resurged in value to peak at over 4,100 US dollars on Monday, a massive recovery after going into a freefall below 3,000 US dollars last Friday, following BTC China’s announcement that it would stop all trading from September 30, and halt registration of new users.

That was followed by similar statements on Friday by OKCoin and Huobi, two of China’s major cryptocurrency platforms. The recovery in bitcoin has since stabilized, with the price at the time of writing at 3,821 US dollars, according to Coinbase.

Other countries including Japan and Australia have looked to regulate cryptocurrencies, with Canberra considering bringing cryptocurrency exchanges under the remit of its financial crime authority, and Japan officially legalizing bitcoin and ruling all exchanges must come under the supervision of the Japan Financial Services Agency by October 1.