China clamps down on cryptocurrency speculation, but not blockchain development

On Aug. 17, Beijing's Chaoyang District, which includes the central business area, issued a ban on shopping areas, hotels and office buildings hosting promotional events for cryptocurrencies. Chinese news site National Business Daily reported last week that a special economic development zone in the southern city of Guangzhou announced a similar ban.

The Chinese government wants to maintain financial stability, and will regulate activity such as soliciting money from ordinary people for investment, according to Jack Lee, managing director at HCM Capital. The company is an investor in many blockchain projects and the private equity arm of Foxconn, best known as Apple's iPhone manufacturer in China.

HCM doesn't expect regulators to ease restrictions around cryptocurrency investing even though the government has embraced blockchain technology, Lee said.

In a speech in May, Chinese President Xi Jinping called blockchain a "breakthrough" technology. The Communist Party also published in August a book whose title translates roughly as "Blockchain — a reader for cadre leaders."

Several local governments including that of Hangzhou — home to tech giant Alibaba — Shanghai and Nanjing have announced blockchain investments. That makes for a total of about $3.57 billion since 2016, according to estimates published Aug. 28 on news site SupChina by Miryam Amsili, a member of the global development team for Shanghai-based Neo Blockchain and a graduate student at Peking University.

Throughout the regulatory changes affecting cryptocurrency, private investment in blockchain remains steady.

BlockVC, which counts Beijing among its main offices, is investing in 40 to 50 blockchain-related projects, according to Mingxuan Li, its chief operating officer and co-founder. He said the company's focus is more on underlying technological development.

Anecdotally, he said, it's typical for a Chinese person to have one or two friends involved with blockchain and that they will not hesitate to try to convince you to join them. As a result, he said he thinks the development of blockchain will spread rapidly in the country, especially since China's large population offers the opportunity to test applications at scale.

Cryptocurrency prices have dropped sharply from their peak late last year and early this year. But they have remained relatively steady despite the flurry of Chinese government announcements, pointed out Feng Jun, who co-founded cryptocurrency news website Hecaijing last year in Beijing. To many, it sounds like more talk than action so far, he said.

Bitcoin's price against the dollar lost 9 percent last month and was trading around $7,255 Monday evening New York time, according to CoinDesk's bitcoin price index. That's up from an August low below $6,000.