Oct. 28 (NBD) -- The cryptography law passed by Chinese authorities on Friday significantly drove the blockchain industry, leading to a hike in prices of blockchain-related shares.

The new law, which will take effect on January 1, 2020, is aimed at "facilitating the development of the cryptography business and ensuring the security of cyberspace and information", state-run press agency Xinhua reported, citing the Chinese authorities.

As is known to all, cryptography is a fundamental element of blockchain technology. "The integrated application of blockchain technology plays an important role in new technological innovation and industrial transformation. We should take blockchain as an important breakthrough for independent innovation of core technology," Chinese President Xi Jinping emphasized during a group study session for members of the Politburo on Thursday.

Photo/Tuchong

The passing of the law was a shot in the arm for the blockchain sector and a raft of companies engaged in blockchain business saw a sharp rise in their stock prices.

In the U.S. market, shares of Xunlei Ltd. (Nasdaq: XNET) skyrocketed to 4.82 U.S. dollars with a record daily increase of 107.76 percent on Friday, and The9 Ltd. (Nasdaq: NCTY) saw its stock surge 20.33 percent to close at 1.13 U.S. dollars.

Around a hundred blockchain stocks in China's A-share market soared by 10 percent daily limit shortly after the Monday trading session started.

Cryptocurrencies, tradable digital asset built on blockchain, were also strongly driven by China's new move. 

Bitcoin shot up to over 10,000 U.S. dollars on some exchanges overnight Friday and Saturday, marking the biggest single-day rise since April 2. Other major cryptocurrencies including ethereum, litecoin and Ripple's XRP rallied between 7 percent and 23 percent over the same period.

It is noteworthy that cryptocurrency exchanges and initial coin offering were banned in 2017 and Chinese authorities are also planning to prohibit all the mining activities of cryptocurrencies.

Some took President Xi's new comments on blockchain as a sign that the country may ease restrictions on cryptocurrencies.

Liu Quan, dean of the Blockchian Research Institute at China Center for Information and Industry Development (CCID), said, "The government encourages and supports blockchain technology and applications, but issuing and speculating on virtual currency under the pretence of developing blockchain should be cracked down on and prohibited."

Luo Mei, director of Tsinghua University School of Economics and Management Research Center for Digital Financial Assets, added that the government emphasizes the combination between blockchain technology and other fields. "The new regulation will be conducive to the deep integration of blockchain and existing industries and boost economic growth in the long run," predicted Luo.

National Business Daily noticed that the blockchain domain has a remarkable potential. Data from Netscribes, a global market intelligence and content solutions provider, shows that the global blockchain technology market will reach 13.96 billion U.S. dollars in size by 2022, growing at a the compound annual growth rate of 42.8 percent for 2017-2022.

According to statistics from Blockchian Research Institute at CCID, the number of blockchain patents disclosed in China in the first half of 2019 totaled 3,547, which exceeded the figure for the whole year of 2018. By the first half of this year, over 700 enterprises and 83 reasearch institutions have reaped revenue from the blockchain business.

Email: lansuying@nbd.com.cn