Cai Wensheng, an angel investor and a founder of the Meitu photo editing app, has criticized the Chinese government’s heavy-handed approach to cryptocurrencies and initial coin offerings (ICOs), saying that China should use mining and exchange operations to its own advantage instead.
According to Wensheng, China houses the majority of the world’s bitcoin mines, estimating that some 80 percent of the world’s bitcoins are produced by hardware located in China. With such potential already located there, it is unwise to squander the opportunities it might offer with a heavy-handed crackdown, he writes, according to bitcoin.com.
“China’s surplus power [can be used] to produce surplus power to produce bitcoin, [which can be] sold to the South Koreans, Japanese and Americans” — making China “a bitcoin foreign exchange earner,” Wensheng wrote on the Chinese website The Paper.
He addressed the challenges and problems that cryptocurrencies face right now, saying that such processes are inevitable in the early stages of new monetary forms. For emerging monetary forms, instability is an inherent component of the requisite “development process,” he says.
“Many of the world’s national currencies have gone through numerous periods of considerable volatility throughout history, claiming that political instability led to dramatic price fluctuations for many sovereign currencies prior to 1973,” said Wenshen, according to bitcoin.com.
Speaking about initial coin offerings (ICOs) — a means of crowdfunding in which startup companies sell digital “tokens” that somewhat resemble cryptocurrencies and can be exchange for both crypto and fiat currencies or company services in the future — Wenshang compared them to the “dotcom bubble” at the end of the 20th century.
Of the “hundreds of companies” that listed Initial Public Offerings (IPOs) in 1999, “few companies are left,” Wenshang notes. However, “One Amazon is enough,” he said, implying that the ICO bubble could lead to the emergence of major companies — companies that could significantly contribute to the Chinese economy.