Chinese Central Bank Publishes Research Paper on what Blockchain Can and Cannot Do

For long, it has been known China has positioned itself as an anti-crypto country, granted its policies meant to limit the use of digital currencies and the afferent services. Regardless, during the last couple of months, the country has made several advancements in terms of blockchain innovation and implementation.

This has led many to believe that China thinks blockchain technology has great potential, and can drive economies to new heights. This might not be entirely true, according to a research paper published by the People’s Bank of China (PBoC), titled “What Blockchain Can and Cannot Do”

To put things better into perspective, the research paper discusses blockchain’s economic functions, the legality of the technology, alongside use case scenarios, practicality and utility. It also tackles decentralized applications, tokenized economies, smart contracts and various consensus mechanisms.

While the paper is well-researched and well-written, it has positioned itself against the blockchain revolution. As such, it proceeds to highlight the fact that while blockchain is usable, it doesn’t really bring about social benefits. According to its author, “In addition to the low physical performance of blockchains, the shortcomings of blockchain economic functions are also important reasons. It should be based on continuous research and experimentation. Rationally objectively assess what the blockchain can and cannot do.”

Blockchain technology was also referred to as a “utopian fantasy”, which is an interesting term choice, as it reportedly advertises a fully-functional and stable financial market. The paper states that blockchain is unable to build an entirely new financial world, yet it is surely capable of fixing some of the shortcomings. Despite this, a paradigm shift isn’t possible, or feasible.

Speaking of legality, the paper notes that: “Crypto assets which are not issued by the government do not have legal status equivalent to fiat currencies”. Additionally, the law is often not respected when dealing with the technology, as “Speculation, manipulation and even violations of laws and regulations are common, especially for token projects involving public offering transactions.”

Despite these aspects, the Chinese government, central bank and local privately-owned companies are working on the development of innovative blockchain-based systems. For instance, the PBoC has talked about its plans to develop a digital currency Yuan that would be used for bank payments, and settlements. Additionally, the central bank has already published over blockchain-related patents in 2017.