It was the news every cryptocurrency enthusiast was fearing: China’s latest regulatory crackdown is perhaps its most significant yet, and has sent shockwaves not only across Asia, but around the world.

Earlier this month, bitcoin lost almost a quarter of its value as the government first banned initial coin offerings (ICO), and then followed up with winding-up orders for cryptocurrency exchanges in Beijing and Shanghai. What is more, it now looks as though BTCChina, the Middle Kingdom’s biggest bitcoin exchange, will close at the end of the month.

Asia-wide phenomenon?

After a somewhat mixed year for cryptocurrencies in Asia, alarm bells are ringing loud on the continent. But anyone who claims to have been blindsided by China’s recent clampdown clearly has not been paying much attention to developments in the country. In fact, the writing has been on the wall for some time.

After all, the government’s move earlier this year to disable cryptocurrency withdrawals and set up an investigatory task force team in conjunction with China’s central bank, the People’s Bank of China, was almost certainly a firm warning of what was to come.

Elsewhere in the Asian trading zone, there have been further hints of creeping government intervention. Australia has announced its own set of regulations. And even digital currency utopia Japan is at it. The Japanese government’s Financial Services Agency (FSA) will place virtual currency exchanges “under full surveillance” starting from next month. The government has also granted the FSA the power to conduct “on-site inspections” at Japan’s 20 or so cryptocurrency exchanges.

Jumping the gun

Those predicting the worst for Asia’s cryptocurrency market may, however, have jumped the gun. Like it or not, bitcoin is big business in almost every corner of the continent – including China.

BitKan, blockchain’s landmark international conference was originally slated to take place in Beijing on September 10, but was quickly rescheduled in the wake of the Chinese crackdown and instead held in Hong Kong ten days later.

Indeed, Hong Kong is hoping Beijing’s loss will be its gain – Hong Kong is not subject to Beijing’s regulations, a fact that could already have created a loophole for China’s bitcoin pioneers. Some investors are hoping to sidestep the crackdown with initial coin offerings (ICO) made outside non-mainland China. A Macao gaming company has recently announced it will attempt to raise US$500 million in ICO by doing just this – while investors in Hong Kong say they now hope press on and create a blockchain hub.

Meanwhile, the People’s Bank of China may be tightening its grip on the country’s bitcoin exchanges, but another publicly owned bank has just announced it is stepping into the blockchain fray. The China Construction Bank, one of mainland China’s “big four” banks, has just developed Hong Kong’s first blockchain-enabled bancassurance project.

Blockchain hope

Indeed, those fearing the worst in the wake of China’s crackdown can take heart from the fact that the Middle Kingdom is still feverishly backing blockchain technology.

China’s Ministry of Industry and Information Technology has just launched a research lab, where “firms and experts” will work together to create usable blockchain technology. The government earlier this year also unveiled plans to launch a tax collecting platform powered by blockchain technology. Furthermore, analysts say that the country’s “large, integrated and highly domestic market infrastructure can drive blockchain much faster than the United States.”

China also recently took part in a groundbreaking South Korea-backed blockchain-powered cargo shipment, which reached port in China’s Quindao earlier this month. And the same ax-wielding People’s Bank of China that recently cracked down so hard on bitcoin was earlier this year actually testing its own digital currency (albeit “cautiously”), after recruiting blockchain experts last year and developing its own far-reaching “five-year” blockchain plan.

Although the People’s Bank has moved fast to draw a distinction between its blockchain activities and its unforgiving stance on digital currencies, if China does move ahead with its many blockchain developments, the stage could well be set for a Middle Kingdom bitcoin comeback. With blockchain framework in place in all sorts of public institutions, bitcoin’s possible reintegration in China could be painless and swift.

Regional rivalries

What is more, should regional economic rival Japan steal a march on China, the latter could well be forced to backtrack. After all, bitcoin was recognized as legal payment method in Japan earlier this year. And there are whispers that Chinese bitcoin traders will seek to relocate to Japan, which could end up with one of the “biggest bitcoin mines in the world.”

Those keen to sign off on China’s cryptocurrency potential would do well to remember that only a few months ago, the government was bandying about the idea of a “national” digital currency. The recent crackdown does represent a significant volte-face, but as any East Asian tech expert will tell you, there are few things in the world that change as frequently as Chinese digital regulations.

Featured image by bfishadow (CC BY 2.0)