China's Blockchain Strategy: A Dual Approach to Innovation and Control

On October 8, 2024, at 10:09 AM EDT, Chinese President Xi Jinping highlighted the importance of blockchain technology. He said, “We must take the blockchain as an important breakthrough for independent innovation of core technologies.” This statement clarified the Chinese government’s commitment to blockchain development, sending a strong message of support and resource allocation.

Following this, the Communist Party of China recognized data as a crucial factor of production, alongside traditional resources like labor and capital.

A key part of China’s blockchain strategy is the Blockchain-Based Service Network (BSN), launched in 2020. According to a CoinDesk report from March 2021, BSN provides a government-regulated platform for blockchain developers. It supports applications across various blockchain networks. There are two versions: one for domestic users and another for international developers.

The domestic version allows authorities to censor or remove entire blockchains if necessary. Yifan He, CEO of Red Date, the company behind BSN, stated, “If they do something wrong we can delete the whole chain.”

In March 2021, the Chinese government officially included blockchain development in its national strategy through the “14th Five-Year Plan” (2021-2025). This plan outlines initiatives for blockchain industry development across 29 provinces and cities, aiming to enhance China's competitiveness in key economic sectors. Officials refer to this as “Chinese-style blockchain,” which operates without cryptocurrencies.

On July 31, 2023, Shanghai released a plan to enhance its urban blockchain digital infrastructure for 2023–2025. This initiative aims to strengthen blockchain applications in Shanghai's economy and governance. It will help coordinate resources in the Yangtze River Delta to establish an international blockchain hub.

The government views blockchain as a tool for boosting national competitiveness and modernizing agriculture. This perspective aligns with broader national goals, which Chinese officials call the “rejuvenation” of the nation. It contrasts sharply with the Western view of blockchain as a means of decentralization and freedom from government control.

China is actively integrating blockchain technology across various sectors. In 2024, it plans to use blockchain to enhance foreign trade, social and economic development, and digital trade. Courts are also exploring blockchain applications to improve judicial processes, working alongside advanced technologies like 5G, artificial intelligence, and big data analytics.

In May 2023, China established a national blockchain research center. The goal is to train at least 500,000 blockchain professionals. Currently, there are about 26,000 active blockchain developers worldwide.

During the Hangzhou Summit in August 2023, officials introduced a blockchain-powered data exchange platform. This platform uses distributed ledger technology to facilitate enterprise IT data trading, ensuring secure and traceable transactions. Over 300 enterprises, including Alibaba Cloud and Huawei, participated in its launch.

In December 2023, China’s Ministry of Public Security launched RealDID, a blockchain-based platform to verify the real identities of its 1.4 billion citizens. This system allows users to register and log in to websites using decentralized identifiers, keeping their real identities hidden. However, the government can link these digital identities to real individuals when necessary.

On March 30, 2024, China launched a key research and development program for a large-scale blockchain infrastructure platform to support the Belt and Road Initiative (BRI). This initiative aims to expand China's economic and political influence through improved trade routes and infrastructure across Asia, Europe, and Africa.

The Belt and Road Initiative is expected to cost between $1 and $8 trillion. It is one of the largest economic development projects in history. It includes the “Information Silk Road,” a digital aspect with deep-sea internet cables and satellites, creating a foundation for advanced software services, including blockchain applications.

China's rapid advancements in blockchain technology have raised concerns in the United States. In November 2023, U.S. lawmakers introduced the CLARITY Act. This proposed legislation aims to prevent federal officials from doing business with Chinese blockchain firms and using Chinese blockchains. The bill targets transactions with companies like iFinex (the parent company of Tether) and The Spartan Network.

China's approach to blockchain demonstrates a dual strategy. On the mainland, Beijing has banned global crypto networks while promoting its own versions of monetary technology that allow for greater control by the Communist Party. Through Hong Kong, China maintains a presence in global crypto markets, using the city as a financial gateway. This two-pronged approach lets China leverage blockchain's potential while keeping tight control over its financial systems.