Last week, China’s president Xi Jinping took Blockchain-oriented domestic politics to another level: the country’s leader mentioned blockchain as a crucial part of worldwide digitalization. The topic  was then picked up by China’s largest TV broadcaster, as the viewers were told that the value of blockchain is higher than the Internet itself.

Besides the high praises coming from the top of the state, there’s action, too: in the past few days, Chinese central bank developed an application to issue blockchain-based checks instead of paper ones, while Alibaba firm promoted blockchain usage in healthcare industry. China got there, but state-supported blockchain adoption can collide with severe cryptocurrency regulation.

China seems quite sceptical about cryptocurrencies as of now. The start of its complex relationship with Bitcoin could be traced back to 2013, when the People’s Bank of China (PBoC) noticed that the coin was gaining popularity in the country. In December 2013, the watchdog, along with five other government bodies, issued an announcement dubbed “Notice on Preventing Financial Risk of Bitcoin”, pinpointing several factors in order to warn investors: namely low safety due to the lack of a centralized entity behind the currency.

Thus, all banks and financial organizations were prohibited to carry out any crypto-related operations, and all companies offering any services involving Bitcoin were obliged to register with the relevant authorities and to follow know-your-customer (KYC) procedures to prevent money laundering, tax evasion, etc. As a result of the notice, Bitcoin has become a virtual commodity in China, like in-game credits. Essentially, it can be traded in its original form, but cannot be exchanged for fiat currency, nor can it serve as a means of payment.