China has seen the future of blockchain, and it doesn’t include cryptocurrencies

China’s Blockchain-based Service Network (BSN), a major state-backed digital infrastructure company, on Tuesday launched the BSN Spartan Network, which it said is a new international public blockchain network with no cryptocurrency involved.

BSN, seen by some as leading the digital equivalent of Beijing’s multibillion-dollar Belt and Road infrastructure plan, was founded in 2020 to help shape China’s Web 3.0 infrastructure. It has powerful supporters, including the National Development and Reform Commission, which sets and executes national economic policy.

“Cryptocurrency – we consider it a speculative asset,” Yifan He, an MIT graduate and CEO of BSN developer Red Date Technology, said at the launch of Spartan Network on Tuesday in Hong Kong – reiterating the policy that cryptocurrencies are not welcome in China.

The BSN Spartan Network, available only outside mainland China, will support three public chains – Ethereum, Cosmos and PolygonEdge – in “non-crypto versions” that are hard forks of their original public chain framework, BSN said in its Spartan white paper released the same day.

The word “blockchain” appeared for the first time in China’s economic planning strategy in March 2021, specifically the five-year plan to set priorities through 2025.

It talks about developing so-called consortium blockchains in finance, supply chain management, government affairs and many other fields. Consortium blockchains are considered less transparent than public versions that allow open participation, but offer faster processing and efficiency.

Nixing crypto

While Beijing shows enthusiasm for blockchain technology, it banned the use of cryptocurrencies in September 2021, a diktat that determines how BSN operates.

The company, which is split into BSN China and BSN International in Hong Kong, has said it aims to build a global network that will allow connectivity between different blockchains, improve efficiency and cut costs for customers. Last year it set up portals in Hong Kong, South Korea, Turkey and Uzbekistan.

The company, which raised US$30 million in a June 2021 funding round led by Saudi Arabia’s Prosperity7 Ventures, sees the new Spartan Network as another bridge to overseas markets.

“Until today, 99.9% of all IT systems in the world do not use public chains. And 99% of applications on public chains are about cryptocurrencies, says CEO He.

Removing cryptocurrencies is “the only way to enable traditional IT systems to start using blockchain and public chain technologies as part of their overall IT architecture,” BSN said in the white paper.

Such a non-crypto feature has appealed to some businesses spooked by crypto’s price volatility.

Multinational bank HSBC Holdings, whose CEO last year said crypto was not for them, plans to explore how BSN Spartan can help “streamline the payment processes for its business partners,” said Vincent Lau, the bank’s regional head of international payments for Asia Pacific. Tuesday in a statement.

Usage cases

Most blockchain builders in China, including tech giants Alibaba and Tencent, create their own consortium blockchains with fiat currency as the sole means of payment.

Ant Group, Aliabab’s fintech affiliate, has built AntChain, where its non-fungible tokens (NFTs) live as a form of “digital collectibles.”

Tencent also has its own blockchain service Zhixin Chain, which operates the NFT platform Huanhe. However, Tencent halted NFT sales on Huanhe last month to “focus on the company’s core strategic considerations.”

China’s courtrooms have begun adopting blockchain technology in evidence archiving, and China’s Supreme Court has called for blockchain-based systems to be built across the country by 2025 to connect local courts.

China’s National Energy Administration is considering using blockchain platforms for electricity trading between power plants and state and national grids, according to an agency policy document.

Building new

Katherine Ng, CEO of Tezos APAC, the blockchain’s regional unit, said Discard in a video interview that it is working with BSN on the Chinese market.

“In terms of the BSN network, it’s a way for us to participate and engage with developers in China in a compatible way,” said Ng.

“Private consortium blockchains in China don’t really interact with each other, even within China itself,” Ng said. “But I think more aggregated networks, like BSN, can help actually move this interoperability standard forward.”

Authorities in Shanghai, struggling to revive the city after months of Covid 19 shutdowns, see financial opportunities in blockchain.

A city policy document in July proposed support for NFTs and those companies that research and pilot digitization of assets, trade in digital intellectual property and digital ownership.

The city said it will set up a $1.4 billion fund to invest in metaverse-related projects and set a goal of building an industry worth 350 billion yuan ($50.6 billion) by the end of 2025.

“Companies building blockchain infrastructure are booming and they may slowly become mainstream in the Web3 space in China,” said Dean Peng, vice president of Metalpha, a Singapore-based digital asset management platform backed by Antpool, a mining pool affiliated with Chinese mining. rig giant Bitmain.

China’s digital infrastructure builders are trying to integrate blockchain with artificial intelligence technology, privacy data processing and game engine development, Peng said. “These areas are highly encouraged [by the government] and are fully compatible.”