Blockchain technology creates a secure, basically permanent record of transactions between two parties, eliminating the need for a third-party intermediary such as a bank. Bitcoin is the first application of the technology, and hundreds of other cryptocurrencies have since emerged. Their prices skyrocketed last year as investors bet blockchain could transform the world as much as the internet did. While major companies and governments — including China’s — are testing the technology, it has yet to prove itself on a large scale.
China used to dominate bitcoin trading, and still accounts for a majority of bitcoin creation through the “mining” process. But increased regulatory scrutiny, especially as bitcoin’s price climbed, culminated in the country’s central bank and other financial authorities prohibiting sales of new cryptocurrencies through so-called ICOs early last September. Beijing also effectively banned domestic bitcoin-yuan trading.
At the same time, Japanese, South Korean and U.S. investors became increasingly interested in