The Chinese government’s announcement that it is blocking ICOs (Initial Coin Offerings) on the grounds of economic and financial disruption has destabilized the digital world order. Those who have completed ICO fundraising are now required to return funds to investors, many of whom, along with other crypto-enthusiasts, are left concerned about the uncertain future of cryptocurrencies in China. Yet if we think that China’s intention is to block innovation and frustrate efforts for a blockchain future, we would be seriously mistaken.
A closer look at China’s approach to cryptocurrencies reveals that the government understands perfectly well how important they are. It may be surprising for some to hear that Ripple, the Fintech start-up based in California, held a reception for a delegation of Chinese academics and central bank officials just a couple of weeks ago. Even more interesting is that the ICO ban was introduced shortly afterwards.
Ripple is one of Silicon Valley’s most successful tech start-ups, after the likes of Uber and Airbnb. In its own words, it offers ‘global financial settlement solutions to enable the world to exchange value like it already exchanges information.’ For example, instead of international bank transfers taking 2-5 days, Ripple’s cryptocurrency XPR can do it in 2-5 seconds. Such rapid transfer of capital will enable banks to source liquidity on demand and allow payment providers to lower forex costs whilst providing faster payment settlements. It is estimated that 90 banks will soon participate in Ripple’s international payment network. In other words, Ripple is just one of the blockchain-derived cryptocurrencies set to revolutionize the world of finance and commerce.
According to a report on WeChat (known in China as Weixin), the purpose of the meeting was to discuss the latest blockchain trends and promote Fintech cooperation between the US and China. Although we do not know for certain, this most probably involved a presentation on Ripple’s cross-border, faster-payment technology – a cheaper and more efficient way of transferring capital digitally. It was possibly a gentle nudge to China that other countries are quickly jumping onto the blockchain bandwagon. Whereas Japanese banks have completed a transfer pilot using this technology, Abu Dhabi’s largest bank already offers it as a service for its commercial users. Besides, China is no doubt keen to understand the pivotal role blockchain technology and cryptocurrencies can play in the future as much as possible. An indicator of this is the Central Bank’s establishment of the Digital Currency Research Institute, located in Beijing.
The day of the meeting coincided with a 10% increase in value for Ripple. It is now approaching a market capitalization of $8.5 billion, thereby making it the fourth largest cryptocurrency after Bitcoin, Ethereum, and Bitcoin Cash. Such progress, then, can imbue us with future optimism – at least for now.
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