Global bitcoin mining has already recovered from the ban imposed by Chinese authorities in May, at which point the East Asian country was the home of roughly half the global output.
Data published on Friday by Blockchain.com show that the hashrate, a measure of total computing power used to mine bitcoin, is up 113% since the Chinese authorities imposed their ban.
It appears that Chinese authorities’ attempts to control the domestic crypto sector with its September ban on crypto use may have a similar impact on the use of digital currencies within its borders.
Activity instead is shifting to the DeFi sector.
What is DeFI?
The term “DeFi” refers to decentralised applications that provide financial services without relying on a centralised intermediary, most of which are built on the Ethereum blockchain.
So-called smart contracts (binding commercial agreements between two parties created in autonomous code) automatically execute transactions when certain conditions are met.
Anshu Siripurapu, an economics specialist at the Council on Foreign Relations explains that the rapid rise of DeFi enterprises means billions of dollars in transactions are now taking place in a relatively unregulated sector, raising concerns about fraud, tax evasion, and cybersecurity, as well as broader financial stability.
This has forced regulators to begin crafting rules for the emerging sector, but developing rules that limit traditional financial risks without stifling innovation is a challenging exercise.
Asia dominates crypto bans
A map showing markets where cryptocurrencies are restricted or banned would be almost completely dominated by Asia in the shape of Russia, Bangladesh and China. China has also cracked down on public decentralised chains because of their use of initial coin offerings.
Yet in January the Shanghai government made an investment in blockchain firm Conflux in a move some observers have interpreted as an attempt by China to build its own version of DeFi and limit the amount of capital leaving the country.
Conflux, which describes itself as China’s only regulatory compliant public blockchain, was awarded a research grant worth in excess of $5m from the Shanghai Science and Technology Committee and Xuhui district government.
In September, Shanghai ShuTu Blockchain Research Institute (a joint venture between Conflux and Shanghai Maritime University) announced that it would be testing an offshore yuan stablecoin in the city’s Lingang Special Area of China (Shanghai) Pilot Free Trade Zone.
Chinese banks look to DeFi
Chinese banks are also looking to get in on the act, with a subsidiary of China Merchants Bank launching a $50m fund that will make early and growth stage investments in start-ups building DeFi and blockchain-related products with public blockchain developer Nervos.
According to Chainalysis’s 2021 Global DeFi Adoption Index, China ranks fourth behind the US, Vietnam…
Read More: capital.com