The Crypto Ecosystem in China: Between technological development and political restriction

Abstract

This thesis is about the analysis of the status of the Crypto ecosystem in China that, despite the government’s decision of banning it, the environment continues to grow with more than the 90% of global transactions.

Different terms are used to describe the blockchain technology, which is often confused with ‘bitcoin’. For this reason a clear timeline history of the birth of bitcoin (the first cryptocurrency) is given, together with a clear explanation of the technology behind it, that is the Blockchain. The first part of this dissertation is divided in three paragraphs. In the first, there is an introduction to Bitcoin and its foundations and elements of Blockchain Technology. In the second one, a broad overview of Altcoins (the bitcoin’s sisters) is given, focusing on the ecosystem generated by the Chinese cryptocurrency NEO and comparing it with the non-Chinese Ethereum one. In the third chapter the utility, function and purpose of Initial Coin Offerings (ICOs) as a mean to fund the kickstart of blockchain technology-based company is described.

The second part, the core one, is structured as follows. After giving a deep insight on why the Crypto ecosystem is flourishing in China and how people and startups are dealing with it, two Chinese government’s notices are translated and commented from a juridical point of view, analyzing the reasons and implications behind the Government’s decision of banning bitcoin and ICOs. In particular the Chinese government's decision to ban cryptocurrencies and then ICOs has created many ambiguities. For example, it is not clear whether it is possible to hold or generate new cryptocurrencies or to own or participate in an ICO. For this reason, in order to overcome this ambiguity and clarify this misunderstanding, we provide an accurate analysis of the notices.

In the last part, some Chinese future blockchain’s projects are examined, giving some ‘what if’ scenarios. In particular, the possible collaboration between the Chinese NEO and Ethereum ecosystem with the government are analyzed together with some reflections on what will happen if this new technology becomes centralized and regulated or if a national cryptocurrency is released by the Chinese Government.