China isn’t cracking down on bitcoin

BI Intelligence

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Amid bitcoin’s continued price volatility, which has been attributed to fluctuations in investor activity in China, more detail has emerged on the meeting the People’s Bank of China (PBOC) held with several bitcoin exchanges last week, according to Reuters.

Since the meeting came at a time when the country is seeking to stem capital outflows, there was speculation that regulators’ attention was turning to bitcoin, with potential limits on outflows to follow. However, the bitcoin exchanges involved have rejected such theories, saying instead that the purpose of the meeting was to reiterate the importance of platforms’ abiding by existing relevant regulations. 

But the widespread proliferation of bitcoin in China may lead to new regulation in the future. China is indisputably the location of the majority of global bitcoin trading, with domestic exchanges claiming they account for more than 90% of global trading volume. So long as that’s the case, the PBOC will likely keep a close eye on the cryptocurrency.

If bitcoin continues to trade at such high volumes in China, regulators will likely feel they have no choice but to issue bitcoin-specific regulations in the future, with any such regulation designed to protect the interests of retail investors. That could be problematic for exchanges, particularly if the amount retail clients can invest is restricted, as they monetize by taking commission.

Blockchain technology, which is best known for powering Bitcoin and other cryptocurrencies, is gaining steam among finance firms because of its potential to streamline processes and increase efficiency. The technology could cut costs by up to $20 billion annually by 2022, according to Santander.

That’s because blockchain, which operates as a distributed ledger, has the ability to allow multiple parties to transfer and store sensitive information in a space that’s secure, permanent, anonymous, and easily accessible. That could simplify paper-heavy, expensive, or logistically complicated financial systems, like remittances and cross-border transfer, shareholder management and ownership exchange, and securities trading, to name a few. And outside of finance, governments and the music industry are investigating the technology’s potential to simplify record-keeping.

As a result, venture capital firms and financial institutions alike are pouring investment into finding, developing, and testing blockchain use cases. Over 50 major financial institutions are involved with collaborative blockchain startups, have begun researching the technology in-house, or have helped fund startups with products rooted in blockchain. 

Jaime Toplin, research associate for BI Intelligence, Business Insider’s premium research service, has compiled a detailed report on blockchain technology that explains how blockchain works, why it has the potential to provide a watershed moment for the financial industry, and the different ways it could be put into practice in the coming years.

Here are some key takeaways from the report:

• Spending on capital markets applications of blockchain is expected to grow at a 52% compound annual growth rate (CAGR) through 2019, according to Aite Group, to reach $400 million that year.
• Banks and major financial institutions are working both collaboratively and independently to develop blockchain tech. Over 50 major financial institutions are involved with collaborative blockchain startups, like R3 CEV or Chain. And many are investing in the technology on their own as well.
• Putting blockchain to use for real-world transactions is likely not that far off. If working groups’ tests are successful, firms could be using it to transact real value as early as the end of this year and we could see widespread industry application within the next few years. 

In full, the report:

• Examines the funding increases that are pouring into blockchain
• Assesses why blockchain is becoming so popular and what factors are driving up increased research and development
• Explains in full how blockchain technology work and what assets make it valuable and vulnerable
• Identifies pain points in the financial industry and profiles how various firms are using blockchain to solve them
• Demonstrates the challenges to mainstream adoption and their potential solutions

To get your copy of this invaluable guide, choose one of these options:

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