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Blockchains Must Have Centralized Foundation: Chinese Regulator

Last Updated March 4, 2021 5:05 PM
Josiah Wilmoth
Last Updated March 4, 2021 5:05 PM

An official from one of China’s top financial regulatory agencies said that he believes blockchains function more effectively when they are built on a centralized system.

Zhang Ye, director of the China Securities Regulatory Commission’s (CSRC) information center, said on Sunday that the government should devote “great attention” to the development of blockchain technology.

However, Zhang — who made these comments at the “Two Sessions” conference in Beijing during an interview with state media outlet Securities Times — tempered his enthusiasm for this nascent technology by stating that more research needs to be devoted to building a decentralized blockchain on top of a centralized foundation.

“[F]rom a technical point of view, the absolute decentralization of the blockchain is not valid because the blockchain itself is a software and the software must be centralized,” he said, according to a rough translation. “Therefore, how to build a decentralized system based on a centralized structure needs further study.”

The regulatory official did acknowledge that some blockchain applications may require decentralization, but he said that these scenarios should be limited and he did not go into detail about what applications should and should not be centralized.

“Admittedly, some application scenarios need to be decentralized, but whether all scenarios need to be decentralized requires careful consideration,” he said.

Zhang’s comments are the latest evidence that China is grappling with whether and how it can reap the benefits of blockchain technology while retaining complete control of the system’s underlying infrastructure.

Last month, the People’s Daily — a state-sponsored media outlet — published an article praising blockchain technology, even as the government has taken measures to snuff out what little volume remains in the country’s once vibrant cryptocurrency trading industry.

Notably, though high-ranking official has also reportedly called for the government to establish a state-controlled digital asset trading platform, sparking speculation that the government could ease prohibitions on cryptocurrency trading, as long as the markets are directly controlled by the government.

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