Blockchain Trial Zones in China Lay Tracks to Expand Digital Yuan

In payments, in the war between cryptocurrencies and central bank digital currencies (CBDCs) that continues to take shape, it is the infrastructure — the rails, in other words — that may determine the future of digital currencies.

Reports came this weekend, detailed by CNBC and other publications, that the Cyberspace Administration of China (CAC) is seeking to promote a range of blockchain projects across as many as 15 “zones” and throughout more than 160 government entities, including government departments, schools and car companies.

Financial Applications Too

The directive seeks to “promote the intensive and balanced layout of blockchain technology infrastructure in the region, form a large-scale, production-level, cross-chain data exchange support capability, and promote the formation of a multi-party collaborative blockchain industry ecology.” The goal is to use blockchain in data sharing, in part, to make business processes more effective. But it is also, per a translation from Cointelegraph, aimed at trade finance, equity markets and cross-border finance.

China’s blockchain pilots take shape just as the country is bringing its digital yuan fully onto the global stage. Even ahead of a “rollout” anticipated in tandem with the Beijing Olympics, China’s digital yuan trials captured $8.3 billion of the country’s payments market in the past six months and $13.68 billion in the past two years. There were more than 260 million users at the end of last year.

Read more: China’s Digital Yuan Captures $8.3B in Payments Over 6 Months

China continues to crack down on cryptos themselves. Last Fall, the People’s Republic of China (PBOC) said “virtual currency derivative transactions are all illegal financial activities and are strictly prohibited.” As a ripple effect, overseas exchanges will not be allowed to operate within the country.

See more: China ‘Blanket’ Crypto Ban Paves Way for CBDCs

The push into government sponsored/designed (and we would suspect, overseen) blockchain projects seems tailor made to the government’s recent push into nonfungible tokens (NFTs), which will be tied to the country’s state run Blockchain Services Network (BSN).

Read more: China Is Building Its Own NFT Behind the Great Firewall

By launching widespread (geographically speaking), wide-ranging (in terms of the use cases) blockchain initiatives, China’s official efforts this week hint at a further crowding out of non-state-sanctioned development of digital ledgers — which would include private blockchains.

It seems that the explorations in equities, trade finance and cross-border finance would include the exchange of data, yes. But it would also help smooth the path for the digital yuan to be more fully embraced in all manner of transactions, particularly commercial ones.

For China, having better control over what has been traditionally thought of as a decentralized technology means having better control over the means of distribution of information, of NFTs, and presumably over state-issued digital currencies. And often, controlling distribution — the rails — is just as important as what moves over those rails.