The race for launching the Central Bank Digital Currencies (CBDCs) is at its peak with many nations already starting the project pilot. One of the major reasons why the regulators want national crypto is mainly to fight the growing use of cryptocurrencies. Authorities are prone to implementing Blockchain technology to develop the economy of the nation but are hesitant to allow private cryptocurrencies.
China is the closest to launching a CBDC and the nation has been a stern believer of the ‘blockchain not bitcoin’ notion. Over the last couple of years, China has already set itself ahead of the competition regarding cryptocurrency and blockchain technology. Despite its ban on cryptocurrencies, the nation has been making great progress regarding the development of blockchain technology.
According to Hong Qi, chairman of Minsheng Bank, blockchain technology would be a boost for China’s economy. He said:
“The full adoption of digital technologies such as blockchain is expected to accelerate the digital transformation and upgrade its agriculture, manufacturing, finance and other services in the next 10 years.”
Minsheng Bank is one of the earliest adopters of blockchain technology in the Chinese banking sector. It is the first national commercial bank-owned principally by non-government enterprises. It is quite evident that Bankers in China are of the belief that blockchain will change the core standards of the financial system.
China is seeing rapid growth in terms of blockchain development. Information gathered by LongHash has revealed that in January itself, 714 blockchain firms have sprung up, resulting in a total of 26,089 companies operating in the country in this industry.
Prior to this, Chinese president Xi Jinping made some bullish comments about blockchain technology back in October stating that China should “take the leading position in the emerging field of blockchain.” While the people considered this a boost to cryptocurrencies, the Chinese state-media was quick enough to respond stating that the people shouldn’t “speculate” about virtual currencies.
The nation’s push for blockchain is fuelled by the fact that the authorities like to have a lot of economical control. A blockchain-based infrastructure could potentially give the government more control over the nation’s economy. It is this sentiment from the government that played into its decision to harshly stamp down on ICOs, Bitcoin, and even access to cryptocurrency exchanges through 2017 and 2018.
A weapon against the USA
Apart from gaining more control over its economy, one of the major reasons why President Xi Jinping has made blockchain development a core agenda for China is the political tension with America. A digital yuan could act as a solid weapon to render its economies immune to crippling US sanctions.
In addition to this, China is also aiming to neuter the USD as a global reserve currency and “displace” the US in the global financial system. Blockchain technology is vital for China to achieve this feat and it doesn’t look impossible to achieve.
Talking about President Xi Jinping’s statement on blockchain development, Morgan Creek Digital co-founder Anthony Pompliano had earlier said that:
“This will be the space race of our generation. America has to embrace technology, including Bitcoin, or we risk being left behind.”
It’s not just China, Venezuela, Iran, and Russia, are all developing their own blockchain-based projects to beat the US. The American Foundation for Defense of Democracies (FDD) had released a report that warns against a scenario in which one of the above countries convinces other nations to use a state-based cryptocurrency based on a major commodity export such as oil, sanctions would be much harder to enforce.
China’s development in this sector raises serious concerns for the United States as blockchain and digital currencies will be used as a tool to work against the nation. If China is successful in its efforts and the adoption and proliferation of its state-backed crypto goes as expected, the US Dollar might have a real competitor on its hands.