Bitcoin does not constitute money in China. In the report, the BAC clarified China’s legal stance on cryptocurrencies like Bitcoin and outlined major crypto …
China, one of the world’s most strict jurisdictions for cryptocurrency trading, has not completely banned Bitcoin (BTC), a local non-profit arbitration organization says.
According to a July 30 report published by the Beijing Arbitration Commission (BAC), China’s prohibition of Bitcoin is more nuanced than some have suggested.
Bitcoin does not constitute money in China
In the report, the BAC clarified China’s legal stance on cryptocurrencies like Bitcoin and outlined major crypto-related activities that are prohibited by the government.
According to the BAC, China prohibits token funding and trading platforms from engaging in exchanges between the legal tender and virtual currency or tokens.
The commission then states that the same law that bans cryptocurrency as money, recognizes it as a virtual commodity.
Furthermore, existing laws are, according to the BAC, not specific enough to regulate Bitcoin as virtual property:
“The “General Principles of Civil Law” do not make specific provisions on the extension and connotation of virtual property, but only stipulates that the protection of virtual property must be stipulated by law, and the specific protection measures of virtual property are entrusted to other laws. As the country currently has no laws on Bitcoin, it cannot be recognized as a virtual property.”
“In summary, the state does not prohibit Bitcoin’s activities as virtual commodities, except for the activities that Bitcoin is engaged in as legal tender,” the report adds.
Additionally, since Bitcoin does not constitute money in China — as the government has not approved Bitcoin as a legal tender — and since Bitcoin is not used as an alternative to the legal tender or fiat currency, it should not be associated with an illegal transaction, the BAC said:
“The prohibited transactions include those when Bitcoin is used as a currency. If Bitcoin does not engage in activities as a currency, it is not a transaction prohibited by the state. For example, in the equity transfer contract dispute decided by the Shenzhen International Arbitration Court, the two parties agreed on the return of Bitcoin. Bitcoin is only used as a general property. Therefore, the transaction does not violate relevant national regulations and should be valid.”
Mixed bag for Bitcon, but full steam ahead on blockchain tech
China has emerged as one of the most strict countries in terms of crypto after regulations on local cryptocurrency exchanges back in 2017. The world’s largest cryptocurrency exchange, Binance, which was originally established in China, had to leave the country due the regulations.
Blockchain is a kind of distributed database with trustworthy record-keeping that makes possible cryptocurrencies like bitcoin as well as new types of …
Despite Washington’s pushback against China’s ambition to lead the world in building emerging technologies such as 5G, Beijing next month will launch a global effort in developing blockchain, a distributed database that experts say could reshape businesses around the world.
Starting August 10, China will roll out the international version of its blockchain infrastructure, the Blockchain Service Network, or BSN. The network gives developers tools and access to blockchain technology through BSN’s overseas data centers so that they can build applications for businesses and smart cities.
“As the BSN takes hold in worldwide countries, it will become the only global infrastructure network that is innovated by China, whose gateway access is controlled by China,” the BSN Alliance declared in a white paper last year.
Blockchain is a kind of distributed database with trustworthy record-keeping that makes possible cryptocurrencies like bitcoin as well as new types of products like digital identification. The technology has the potential to create decentralized, more transparent digital networks.
U.S. Representative Bill Foster, a congressman who holds a doctorate in physics and is a leader of a group of American lawmakers studying the technology, has called it “a disruptive technology that will change the way we do business in almost every sector.”
Blockchain technology can create more transparent record-keeping with open-source code to create trustworthy databases. But China’s system is a more centralized alternative overseen by the BSN Alliance, a group of state-owned companies that designs its digital architecture and maintains control over the databases.
China hopes that this managed network, which it says offers cheaper costs and better interoperability over other competitors, will become the preferred option for businesses and governments trying to use the technology.
Backed by the Chinese government, BSN already is the world’s largest blockchain ecosystem that is expected to serve as the backbone for massive interconnectivity both in China and around the world. It already has more than 100 city-nodes, or physical devices running on the network, stationed on six continents. The network hopes to deploy up to 200 more by the end of this year.
A Chinese national priority
Just as the country’s aggressive international expansion in other major emerging technologies such as 5G and artificial intelligence, China declared blockchain a national technology priority in 2016. It was mentioned twice in the Chinese State Council’s 13th five-year economic plan that was released that year.
Chinese President Xi Jinping emphasized blockchain as “an important breakthrough,” and promised that China would “seize the opportunity” during his speech in October at a so-called “collective study” session held by the Political Bureau of the Communist Party of China (CPC) Central Committee.
In Xi’s words, China will “take the leading position … occupy the commanding heights of innovation, and gain new industrial advantages.” The meeting had only one agenda on the table: the current status and trends of blockchain technology.
“China is the most active major national government in the world in blockchain development. China is one of the few countries that sees blockchain as a strategic emerging technology, alongside areas such as artificial intelligence and 5G wireless,” Kevin Werbach, a professor at the Wharton School, University of Pennsylvania, told VOA.
China now has more than 700 blockchain projects registered since last year with the country’s Cyberspace Administration. According to a white paper on China’s blockchain patent application released last Friday, China holds more blockchain patents than any other country in the world. Eric Jing, Chairman at China’s tech giant Alibaba’s Ant Financial Services, told reporters last week that users of its blockchain service are uploading 100 million digital assets a day – mostly records of transactions.
A blockchain with Chinese characteristics
BSN was born last spring while the world was struggling to deal with catastrophic social, economic, and political challenges caused by the COVID-19 pandemic. As part of Beijing’s grand strategy to lead the digital transformation of the world economy, the plan is to make the network so effective and low-cost that it becomes the dominant provider for blockchain cloud computing services.
“The concerns are that more developer and customer mindshare will shift to Chinese platforms and that China will push technical standards to reflect its policy positions,” said Werbach, who once served as a consultant for the CIA on a blockchain training program.
Werbach said that is why it’s essential to the Chinese blockchain system is different from the open models that emphasize decentralization.
The geopolitical implications of the technology depend on who designs and implements the technologies, argued Werbach, who has written extensively on emerging technologies such as blockchain. “China is focused more on permissioned blockchains for enterprise applications, and on Chinese platforms that build in the capability for oversight and compliance that the Chinese government requires,” said Werbach in an email to VOA.
Two days after Xi’s speech last year, a blockchain initiative announced by the CCP enabled party members to pledge their loyalty to Xi, by immutably recording it on the blockchain ledger.
As Chinese leaders press the country’s engineers to forge ahead on the technology, companies overseas are sounding an alarm that the United States is ceding its role as the internet’s leading innovator.
A recent white paper co-authored by Amazon Web Services, IBM, Deloitte, and others noted that U.S. military is falling behind China and Russia in a blockchain arms race.
“While China and Russia have invested millions of dollars worth of research and development (R&D) into the technology, the policymakers of our country are still trying to understand what the technology is,” said the paper that was released last May.
A report published last year by the Wharton School of the University of Pennsylvania also warned about China’s blockchain dominance: “By all counts, China is leading the world in the use and development of blockchain technology.”
“We are way behind China when it comes to blockchain technology,” Chris Larsen, executive chairman of Ripple Labs Inc, a U.S.-based leading blockchain company, told The Wall Street Journal recently.
Werbach said if U.S. policymakers and companies do not compete for blockchain business, “blockchain with Chinese characteristics will become more of the norm.”
On the other hand, some analysts remain skeptical that China is leading the world on technology. Larry Wortzel, a commissioner of the U.S.-China Economic and Security Review Commission of the U.S. Congress, pointed out in an email to VOA that IBM and other American companies have the technology and use it. “I do not believe the US is losing a Blockchain race,'” said Dr. Wortzel.
In the “top 50 blockchain company” list compiled by Forbes last year, Amazon was ranked number one with Ant Financial of China’s Alibaba second. Among the top 5 companies, two are Americans, two are Chinese ones, and one is from England.
Martin Chorzempa, a research fellow at Peterson Institute for International Economics, told VOA that most of the money China is pouring in would be wasted. “As we can see from the recent global pushback against Huawei, especially in Australia and Europe, I do not see it as plausible that the world will adopt on Chinese blockchain infrastructure.”
China’s Blockchain Services Network. A new global emerging infrastructure. By Shoufeng Cao, Felicity Deane, Marcus Foth, Warwick Powell, Lachlan …
Note from the authors: We are engaged in a $1m, 2-year research study into blockchain and smart contracts funded by the Food Agility CRC. As part of this project, we have investigated China’s new Blockchain Service Network (BSN), and written an opinion article that discusses critical issues such as regulatory and privacy challenges and uncertainties. This article is written for an Australian industry audience interested in connecting with the BSN infrastructure, and sheds light on some of the choice points and risks Australian businesses.
Anniversaries can be important focal moments. Just ask those who forget how significant they can be. And so it is in the world of blockchain technology.
Five years ago, on 30 July 2015, the Ethereum genesis block was minted. This event brought blockchain to the wider world. Unlike the ‘single purpose’ Bitcoin protocol, Ethereum was conceived and developed as a general purpose blockchain. A “world computer.”
Now, Ethereum celebrates its fifth milestone by deploying Ethereum 2.0. Concurrently, the blockchain world will also experience what could be the next major jolt. The 30 July 2020 is the date slated for the launch of the international version of China’s Blockchain-enabled Services Network (BSN).
The BSN promises to be an IT infrastructure with global significance. It matters to Australia, and here is why.
The Blockchain-enabled Services Network
On 25 April 2020, China launched the Chinese version of BSN for commercial use. This is the latest in a suite of initiatives aimed at boosting the role of technology – especially blockchain – in China’s economic development and intensifying global trade, including the call for a national focus on blockchain by President Xi Jinping last October.
Key Features of the BSN
The BSN is China’s national blockchain ecosystem. It is described as the ‘Internet of Blockchains and applications built on blockchains.’ It should not be confused with the Chinese central bank digital currency (DCEP) which is expected to integrate with the broader BSN ecosystem.
The BSN is a permissioned chain powered by Hyperledger Fabric that provides a foundational data superhighway infrastructure enabling information flows between governments in China, businesses, organisations, and individuals. It promises to be ‘blockchain protocol agnostic’ allowing other blockchain systems to dock and communicate across its framework.
It achieves all of this through what are known as Public City Nodes (PCNs), a combination of hardware and software. There are already 128 PSNs: 76 in China, 44 are under construction and 6 located overseas. More are planned, in China and elsewhere with 200 PCNs in total targeted for end of 2020. Ultimately, this will serve as a large-scale infrastructure of the Digital Silk Road (part of China’s Belt and Road Initiative – BRI) to interconnect China’s trade partners.
What are the broader strategic issues posed by the BSN for Australian industries? The BSN forms the technological foundations of China’s trans-national Digital Silk Road to complement the more conventional bricks and mortar aspects of the country’s ambitious BRI.
The BRI is a global and long-term strategy involving significant Chinese investment in the development of trade relationships and infrastructure in over 70 countries. While it has been criticised as ‘debt trap diplomacy,’ recent research casts significant doubt on this characterisation. The BRI lays the physical infrastructure for the storage and distribution of goods. The BSN is the digital equivalent.
Cross-border trade ultimately involves the interaction of supply chains across sovereign territories. The ability of goods and services to circulate is increasingly a function of the ability of data about these goods to pass from one jurisdiction to another in ways that provide comfort and confidence to each jurisdiction. This means ensuring that this data is acceptable to those managing the passage of goods from one jurisdiction to another. A decentralised data ledger, where data is stored in a digital network accessible to all involved in the relevant transactions, streamlines data flows and strengthens trade relationships.
Issues and Opportunities
In February 2020, the Australian Government launched the National Blockchain Roadmap, which sets the stage for strategic engagement in initiatives such as the BSN. The Roadmap identifies priority areas including food supply chains and financial services. On both fronts, the BSN presents opportunities and challenges.
The opportunities are straightforward, e.g. technical interoperability, and potential ease and cost of access. The challenges are more subtle and complex. Many relate to concerns around data privacy, data governance, and data sovereignty that see a disparity between the Australian and Chinese standards. Key considerations include:
• Gaining permission to operate on the BSN: This requires authority from the BSN administrator, presupposing compliance with China’s cryptography and privacy requirements.
• Cross-jurisdictional data flow: Australian participants will need to carefully examine how this interacts with privacy and data confidentiality protection concerns and national requirements.
• Uncertainty of Chinese Cryptographic protocols: Are there unknown backdoors that pose data security risks?
• Harmonising business expectations: We will need best practice for data confidentiality and data security. Australia’s leadership role in ISO Technical Committee 307 on blockchain standards can help here.
All this needs to be addressed in the increasingly complex landscape of regional geo-political friction and uncertainty. For Australia, one pathway is to address BSN via our role in the Regional Comprehensive Partnership Agreement (RCEP). Unlike the BRI, the RCEP is a more traditional multilateral agreement between ASEAN countries and Japan, Republic of Korea, New Zealand, China, and Australia. Of RCEP signatory countries, only Australia is not also a BRI participant. Membership of RCEP provides Australia with the institutional means to interact with the BRI through ‘porous edges.’
Contemporary geopolitical dynamics are perhaps the most challenging that Australia has faced for quite some time. Australia again confronts a need to navigate bilateral and multilateral relationships increasingly framed by tensions between the country’s largest trading partners on the one hand, and Australia’s most significant historic security ally on the other. In this context, the BSN is another instalment of what Hugh White calls ‘the China choice.’
An extended version of this article is available here.
*Some of the research on the BSN is being undertaken as part of the Export Smart Contracts project that is a collaboration between BeefLedger Ltd, Queensland University of Technology (QUT), and Food Agility CRC. This project was supported by funding from Food Agility CRC Ltd, funded under the Commonwealth Government CRC Program. The CRC Program supports industry-led collaborations between industry, researchers and the community. The opinions are those of the authors alone.
Dr Shoufeng Cao is a Postdoctoral Research Fellow with the QUT Business School. Dr Felicity Deane is a Senior Lecturer in the Faculty of Law at QUT. Professor Marcus Foth is Professor of Urban Informatics in the QUT Design Lab and a Fellow of the ACS. Adj. Prof. Warwick Powell is Chairman of BeefLedger Ltd. Lachlan Robb is a PhD Candidate in the Faculty of Law at QUT. Charles Turner-Morris is a Director of BeefLedger Ltd.
“Our engineers are helping America remain a global leader in emergingtechnologies like artificial intelligence, self driving cars and quantum …
The heads of Facebook, Apple, Google and Amazon appeared before angry lawmakers Wednesday as Congress prepares to weigh new anti-monopoly regulations, including possibly breaking them up. Facebook’s Mark Zuckerberg turned to a familiar argument, saying that breaking up the big tech companies would hurt U.S. competitiveness against China in developing new technologies and America’s ability to curb Chinese influence globally.
So are U.S. tech giants an asset to the U.S. in its competition with China or a hindrance?
Google CEO Sundar Pichei answered several questions about his company’s loyalty to the United States by recounting its expanding work with the Defense Department. Ever more, he attempted to cast Google as an engine of U.S. innovation.
“Our engineers are helping America remain a global leader in emerging technologies like artificial intelligence, self driving cars and quantum computing,” he said.
Zuckerberg contrasted between what he described as Facebook’s “American” values and ideas with those of China. “China is building its own version of the internet focused on very different ideas, and they are exporting their vision to other countries,” he said in his prepared testimony.
He is not alone in this view. Daniel Castro, director of the Center for Data Innovation at the libertarian-leaning Internet Technology and Innovation Foundation, told Defense One, ”Breaking up U.S. tech firms would undercut American innovation. At a time when Chinese companies are growing more dominant in the global digital economy, U.S. policymakers should not hamstring successful tech companies.”
Eric Schmidt, Google’s former CEO who now chairs the Defense Innovation Board, has made similar statements, telling the Telegraphin May, “Chinese companies are growing faster, they have higher valuations, and they have more users than their non-Chinese counterparts…It’s very important to understand that there is a global competition around technology innovation, and China is a significant player and likely to remain so.”
But not everyone agrees. David Segal, co-founder of the left-leaning group Demand Progress, took a categorically different view, telling Defense One, “Far from stifling innovation, antitrust enforcement is necessary in order to enable it.” He pointed to what he described as “kill zones” or areas of technology development that are too close to the products that the giants produce to attract venture capital.
Legal scholar Ganesh Sitaraman argues that conflating big tech with American innovation is part of the problem. Big tech, he says, is too intricately intertwined with China to be purely American.
“The claim that big American tech companies are somehow an alternative to Chinese dominance—or, in the more extreme form, that they are competing with China on behalf of the United States—is largely backwards” he argues, in a January article for the Knight First Amendment Institute. “Big tech’s integration with China thus supports the rise and export of digital authoritarianism; deepens economic dependence that can be used as leverage against the United States in future geopolitical moments; forces companies to self-censor and contort their preferences to serve Chinese censors and officials.”
Lawmakers of both parties love to hate on big tech and its poster-child representatives, like those summoned to Wednesday’s hearing. Conservatives routinely claim that Google is censoring their speech, a line they returned to repeatedly on Wednesday. Liberals argue that Facebook doesn’t do a good enough job of calling out misinformation, especially if it might anger conservatives. Some observers worry that all of those resentments get in the way of a functional discussion about whether or not the companies are too big.
“I’m not confident that in the current environment you would see constructive solutions put forward that are not based on political retaliation, rather than a principled approach,” said Mieke Eoyang, vice president for national security at think tank Third Way.
There is ample reason for lawmakers to be suspicious of how the big tech interacts with the Chinese government. A May report from London-based research firm Top10VPN shows that Amazon provides web services to Chinese companies on a Commerce Department sanctioned “Entity” list. Google has an AI research effort in China.
Facebook, which is effectively banned in the country, is arguably the least reliant on the Chinese market. Hong Kong-based TikTok is a major competitor to Facebook-owned Instagram. But that doesn’t tell the whole story. Facebook is such a large gamer marketplace, it still makes money off of China from companies like Tencent that need Facebook’s users to play their games.
From the Pentagon’s perspective, American tech giants do offer a unique technological resource, one that does produce innovation and that arguably would not exist if they were broken up. Consider the Pentagon’s JEDI cloud program. Smaller cloud providers complained that the program’s requirements were tilted toward Amazon, the only company that many believed could meet them. Part of the reason that the JEDI contract came down to a race between Microsoft and Amazon (after Google pulled out) is because those are the companies with the largest cloud offerings, able to provide the highest level of security. It was only after visiting them that former Defense Secretary James Mattis realized that what American’s private big tech firms were doing with cloud computing was decades ahead of what the government was doing with smaller, patchwork capabilities. He also realized that cloud computing at enterprise scale was essential to real innovation in AI.
The size of that cloud capability and the amount of data available plays a big role in a company’s ability to develop next-generation AI products. Google’s compute power, and access to a massive dataset of online video footage via YouTube, was vital to the development of deep learning technologies. Facebook’s compute power and its access to billions of biometric facial records — pictures of faces — allowed it to create unique facial recognition technology to rival the human brain.
These companies developed the world’s largest compute capabilities in order to become the world’s largest companies. Busting them up could eliminate something that doesn’t exist anywhere else and actually is a driver for innovation, one that arguably requires more regulation and oversight but also that can’t be replicated at a smaller scale.
The unique resource of big tech firms is what Congress is considering in the context of these companies’ overall effects on the market, individuals, and tangled U.S. relations with China. How to do that? The answer is carefully and case by case. While Republicans and Democrats love to vilify big tech, these companies are very different from one another, even if they do have anti-competitive practices.
“I think these companies are all differently situated based on their business models. So when it comes to discussions around breaking them up, the implications are all different,” said Eoyang, “as are the unintended consequences of doing so.”
ARM, the chip designer owned by SoftBank Group, accused the ousted head of its China joint venture of hurting its business there, escalating a …
ARM, the chip designer owned by SoftBank Group, accused the ousted head of its China joint venture of hurting its business there, escalating a dispute that is becoming a test of Beijing’s willingness to protect foreign investment in the world’s second-largest economy.
The UK chip giant in June announced it was firing Allen Wu, the head of its Chinese unit, over undisclosed breaches of conduct, but the executive has refused to step down and remains in control of the strategically important operation. Rather than the peaceful, rapid resolution that both sides have said they want, the situation has deteriorated.
Mr Wu has hired his own security and would not let representatives of Arm or his board on the premises, said a person familiar with the situation. He has refused to hold a planned event to connect Chinese chipmakers with Arm and avoided negotiations despite public statements to the contrary, said the person, who asked not to be named.
Mr Wu is “propagating false information and creating a culture of fear and confusion among Arm China employees,” the UK-based company said in a statement. “Allen’s focus on his own self-preservation has also put China semiconductor innovation at risk as he has attempted to block the critical communication and support our China partners require from Arm for ongoing and future chip designs.”
Arm China disputed the claims in an e-mailed response to queries, adding that Mr Wu was open to talks and there have been no disruptions in business engagement between Arm and its China clients.
China is the largest market for semiconductors and the UK firm relies on Arm China to conduct business with local customers, including Huawei Technologies. The country accounts for a large proportion of the company’s global revenue and resolving the conflict will be crucial to SoftBank’s reported plans to sell Arm.
In early June, Arm China’s board – which includes representatives from Arm and Chinese investors – ousted Mr Wu for setting up an investing firm that competes with its own businesses there. He refused to accept the decision, saying it was invalid and has remained in control at Arm China’s headquarters in Shenzhen.
The intricacies of Chinese rules confer an advantage to Mr Wu as the holder of key registration documents. As the legal representative of Arm China, he holds the company’s registration documents and the company seal, or stamp. Changing the legal representative requires taking possession of the company stamp – something he has refused to give up.
Arm is responding to the latest salvo from Arm China, a public letter posted on its social media accounts that was ostensibly from 176 employees. It called on Beijing to protect the business and said the UK company was going directly to customers and threatening to amend or cancel contracts if they did not stop dealing with Arm China. The letter said the Chinese venture had the exclusive rights to sell Arm’s products in the country.
Both parties are arguing that the longer things drag on the worse the impact will be on the Chinese chip industry, which relies on Arm’s technology. They also urged the Chinese government to intervene and resolve the disagreement. If and when authorities in the world’s most populous country get involved, their actions could provide a major indicator of Beijing’s willingness to uphold the rights of overseas investors on its soil.
Any response by Chinese authorities will also be closely watched amid deteriorating ties with the United Kingdom. Beijing has clashed with Boris Johnson’s government over its condemnation of a new security law imposed in Hong Kong and also attacked a ban on the use of Huawei components in British 5G networks.
The Arm China ordeal may make foreign companies think twice about investing in China, said Alex Capri, a research fellow at the Hinrich Foundation.
“It reflected very poorly on the Chinese semiconductor scene. It just shed the light on that it is not a level playing field and it is a very dangerous environment for foreign companies, certainly in the tech sector,” he said.
Softbank is considering selling the UK company either through a private deal or public stock listing, people with knowledge of the matter said earlier this month.
Arm’s technology underpins the most important component in almost all of the world’s smartphones and is making headway in other markets such as personal computers and servers. The company sells chip designs and licenses the fundamental technology that allows chips to communicate with software to companies that prefer to design their own. BLOOMBERG