A close reading of the Politburo’s blockchain content leaves room for ambiguity in digital currency/mining?

Preface: China's official documents have their own discourse system. When interpreting them carefully, official media often make mistakes. This is an article that attempts to interpret the subtext behind them. I hope it is also the clearest article in the cryptocurrency circle on the collective study of the Politburo. Please read it.

On October 25, 2019, the Politburo held a collective study session on blockchain. Prior to this, only Internet+, big data, and artificial intelligence had been collectively studied by the Politburo, and these topics have risen to the national strategic level.

Unlike them, blockchain has an ambiguous aspect, which is digital currency. Bitcoin was created before blockchain technology, and blockchain technology has gradually expanded with the development of digital currency. At present, except for its application in the field of digital currency, blockchain technology has not found a large-scale application scenario.

The Chinese government is conservative about digital currency. In 2013, the Chinese government issued its first document on Bitcoin: "Notice of the People's Bank of China, the Ministry of Industry and Information Technology, the China Banking Regulatory Commission, the China Securities Regulatory Commission, and the China Insurance Regulatory Commission on Preventing Bitcoin Risks." The notice defines Bitcoin as a virtual commodity and prohibits traditional financial institutions from providing Bitcoin-related services.

In 2017, the Central Bank, the Central Cyberspace Affairs Commission, the Ministry of Industry and Information Technology, the State Administration for Industry and Commerce, the China Banking Regulatory Commission, the China Securities Regulatory Commission, and the China Insurance Regulatory Commission issued the "Notice on Preventing Risks in the Issuance and Financing of Tokens", which is the second document on digital currency. Compared with the first document, the Cyberspace Administration and the State Administration for Industry and Commerce joined in. This document expands the scope of traditional financial institutions to all digital currency service platforms, and no institution is allowed to provide digital currency-related services.

There is another industry related to digital currency, which is the digital currency mining industry, which can be understood as the process of producing new digital currency. Among them, the vast majority of mining machines and mining farms are in China, and Bitmain (Beijing), Shenma (Shenzhen), Canaan (Hangzhou), and Xindong (Wuhan) have monopolized the global market.

Regarding the digital currency mining industry, the Internet Finance Regulation Office, led by the central bank, has issued an internal document defining it as "consuming a large amount of resources while also fueling the hype of virtual currency investment" and requiring an orderly exit. This is also the only document on the virtual currency mining industry.

This year, the National Development and Reform Commission led the " Guidelines for Industrial Structure Adjustment" to define "virtual currency mining" as an eliminated industry in the draft for comments. Later, Wu said that the blockchain exclusively discovered that it was removed from the eliminated industries when the official draft was released. This does not mean that the government recognizes it, but that the current policy attitude led by the National Development and Reform Commission does not want to ban it. (Please refer to the article "Major policy adjustment! The National Development and Reform Commission deleted "virtual currency mining" from the "eliminated industries")

Compared with the United States, Japan, Europe and other countries, the biggest problem with China's digital currency policy is that decision makers have not formulated reasonable and neutral regulatory measures for it. The 94-size-fits-all approach is said to have caused disagreements among decision makers and even aroused external doubts about the Chinese government's insufficient regulatory capabilities.

Where the future is heading? The direction of the Politburo’s collective study session is worth careful reading.

Official documents are often revised level by level, and the content that remains in the end basically represents the attitude of the decision-makers. The speeches at the collective study are expected to be reported by a certain department of the Ministry of Industry and Information Technology, a certain research center, the lecturer, and other departments, and refer to the opinions of the central bank, the Internet Information Office, and other departments, and the General Office of the Central Committee will review and other processes. The direction of this study must have been recognized by the highest level.

1: " The application of blockchain technology has extended to many fields such as digital finance, Internet of Things, intelligent manufacturing, supply chain management, and digital asset trading. At present, major countries in the world are accelerating the development of blockchain technology. China has a good foundation in the field of blockchain. We must accelerate the development of blockchain technology and industry innovation and actively promote the integrated development of blockchain and economic society."

Intensive reading: This is the first paragraph of the conclusion of the collective study, which gives a brief outline and summarizes the past.

Although digital currency is not mentioned, "digital finance" and "digital asset transactions" are basically equivalent to using the official discourse system to talk about Bitcoin transactions. Digital finance is placed first, which also recognizes the main application scenarios of blockchain in finance to some extent.

“Internet of Things and smart manufacturing” seem to be able to be derived into mining machines;

"Major countries around the world are accelerating the development of blockchain technology, and my country has a good foundation in the field of blockchain," which shows that they have recognized the global trend and have not denied the value of Chinese exchanges and mining machine manufacturers in national development;

“Actively promoting the integrated development of blockchain and the economy and society” has a certain negative subtext, implying that current blockchain companies do not serve the real economy, but are more idle at the virtual level.

Summary: Positive view of the value of digital currency and mining industry

2: " We must strengthen the guidance and regulation of blockchain technology, strengthen the research and analysis of blockchain security risks, closely follow development trends, and actively explore development laws. We must explore the establishment of a security guarantee system that adapts to the blockchain technology mechanism, guide and promote blockchain developers and platform operators to strengthen industry self-discipline and implement security responsibilities. We must implement the rule of law in the management of blockchain and promote the safe and orderly development of blockchain. Relevant departments and their responsible leaders should pay attention to the current status and trends of blockchain technology development, improve the ability to use and manage blockchain technology, and enable blockchain technology to play a greater role in building a cyber power, developing the digital economy, and promoting economic and social development."

Intensive reading: This is the last paragraph of the collective learning conclusion, looking forward to the future and policy guidance.

“ We need to strengthen the guidance and regulation of blockchain technology, and strengthen the research and analysis of blockchain security risks .” This paragraph is undoubtedly aimed at the digital currency and mining industries that have certain risks in blockchain technology. “ Actively explore the laws of development ” implies that we should follow the laws of the market, rather than relying entirely on administrative means of management.

" Guide and promote blockchain developers and platform operators to strengthen industry self-discipline and fulfill security responsibilities. Implement the rule of law in the management of blockchain and promote the safe and orderly development of blockchain ." This sentence clarifies the order of self-discipline and supervision, which is very important. It means that in the face of possible risks in blockchain, the first thing is to require the platform to exercise self-discipline, not to violate existing financial regulations, and not to cause mass incidents. In other words, if you exercise self-discipline, the government will not interfere too much. The second defines the supervisory status of the Cyberspace Administration of China.

" The relevant departments and their responsible leading comrades should ...play a greater role." The last sentence seems to be a veiled criticism that in the past the relevant departments knew too little about this aspect, the supervision was too one-size-fits-all, and insufficient support was given.

Summary: The government should strengthen support, respect market rules, and avoid blind interference.

3: After talking about the beginning and the end, let's talk about the two middle paragraphs. One paragraph talks about blockchain technology, and the other about its integration with the real economy. These two paragraphs are the longest, but relatively unoriginal. They avoid all the industries and content related to the "currency circle" at present, and not even a word can cause ambiguity. Not mentioning a word is also a hint in itself. This is a bit negative, and I am afraid it will attract a large number of scammers, consuming meaningless social resources and government funds, but not bringing additional value.

This also reflects the government's contradictory psychology. In fact, there are also disputes among decision-makers. In theory, the blockchain is under the jurisdiction of the Software Department of the Ministry of Industry and Information Technology, which has a relatively open attitude. But when it comes to finance, it involves the conservative attitudes of the People's Bank of China and the three regulatory bodies. This is also the reason for the current polarization between the blockchain and currency circles.

This is very clear from the perspective of official media, such as the People's Daily article "Promoting the safe and orderly development of blockchain", which has an open attitude and emphasizes that blockchain is "an incentive and constraint mechanism based on a combination of multiple technologies", which is intended to find legitimacy for digital currency and tokens; but there are also conservatives who often say " prevent the use of blockchain to issue virtual currency, speculate on air coins, etc. " If you dig deeper, is the DCEP that the central bank is about to launch considered a virtual currency?

In my opinion, what is the real additional value of blockchain? It is the trust brought by decentralization. This trust can only be applied to virtual currency/digital assets. Mining machines that produce virtual currency, exchanges that trade currency, and various financial derivatives are all links in the blockchain + digital asset chain.

As an aside, although all sectors have made a lot of efforts, the Politburo's collective study of this sudden incident is most likely the reason why the National Development and Reform Commission took the initiative to remove virtual currency mining from the eliminated industries in the newly released "Guidelines for Industrial Structure Adjustment".

Finally, in summary, from the careful reading of the Politburo's collective learning content, we can see that decision makers have not avoided the existence and value of virtual currency, which is worthy of praise; for the future, they hope to support and regulate the industry in accordance with the law with a non-interference attitude on the basis of industry self-discipline; but at the same time, it also exposes that the understanding of blockchain technology is too limited to the academic circles and institutions within the system. "Nine dragons governing the water" and the separation of management of different departments will lead to the situation of false fire in the blockchain circle and suppression of the currency circle in the future.