Chinese companies are flocking to blockchain and cryptocurrency technology despite regulators’ efforts to contain risks, reports in Reuters said Friday (Jan. 12).
The publication highlighted stock rallies amongst companies that recently disclosed their involvement in the blockchain space. Financial electronic products and solutions provider Cashway Technologies, for instance, saw share bumps two days in a row after revealing its involvement in the technology, despite specifying that its involvement only goes so far as to hire “two young graduates majoring in encryption algorithm.”
Similarly, software company Client Service International saw a 10 percent share boost for the third day in a row on Friday despite being flagged for investor risk. Analysts linked the share spike to its announcement that it is “exploring” blockchain, according to reports.
“It takes only five minutes to think of an idea that has something to do with blockchain,” said Wu Beicheng, a retail investor, in an interview with the publication. “But it’s a totally different story to build a business model around it that makes money.”
Reports said shares are rallying at these companies even as Chinese regulators warn against financial and investor risk. Reuters noted that Beijing has banned the controversial funding strategy of the initial coin offering (ICO) and forced several cryptocurrency exchanges to close.
The Shanghai Stock Exchange pressed computer software firm Shanghai U9 Game Co. late last week about its involvement in blockchain technology, questioning whether the company only announced its current and upcoming use of blockchain for the sake of bumping its shares, reports said.
“It’s a bit like the dot.com bubble,” said Robin Zhang, compliance manager at financial securities services provider Soochow Securities CSSD, in another interview with the publication. “But after the bubble burst, some companies with real customers, revenues and performance will stand out, like Google or Alibaba.”