Any casual fan of cryptocurrency is at least vaguely familiar with the price narrative surrounding Bitcoin. Something good happens, the price goes up. Something bad happens, the price goes down. Sometimes Bitcoin seems to go up or down for no good reason. The TV and social media analysts do their best to come up with ideas for the pump or dump. A recent pump from $7,400 to $9,400 in October appears to be related directly to the news that China is officially endorsing and promoting blockchain, the underlying technology for Bitcoin, and over 2,000 other cryptocurrencies.
In October, Chinese President Xi Jinping stated in a televised speech that blockchain technology would be officially recognized and supported by the government. This announcement came as a surprise, considering China’s indecisive stance on cryptocurrencies in the past. Nevertheless, this represents a significant step forward in creating a healthy environment for state-sponsored blockchain projects within China.
This move by the Chinese government may be the push needed for Chinese blockchain and cryptocurrency projects to begin maturing. Since 2015 China has banned, and then un-banned, Bitcoin trading, mining, and usage, resulting in substantial price swings. This occurrence has become so commonplace that several memes circulate each time China changes its policy.
Meanwhile, legislators at the federal level in the US government continue to bicker and argue over cryptocurrencies, their classification, tax implications, and status as a security. The time spent classifying and siloing cryptocurrencies could be better spent encouraging blockchain development and adoption. While there are some government programs investigating blockchain technology, these efforts are small in comparison to the growth in China and the Asian sub-continent. If China surpasses the US in terms of resources put towards development, it could signal a blockchain arms race. Forbes writer, Biser Dimitrov, holds a similar position “Having a superior blockchain technology will give China an enormous trading opportunity with the emerging technology markets.”
In a protracted scenario, China and other countries more supportive of blockchain could overtake the US in terms of usage and adoption. While China’s new love for blockchain is merely a few months old, it has already registered over 500 projects. As part of the conditions of endorsement, all blockchain projects must register with the government. Notable mentions on that list are Alibaba, Baidu, Tencent, and Huawei, all multi-billion dollar tech giants with massive influence.
Another reason for China’s new-found love of blockchain could be its planned stablecoin, the Digital Yuan. Taking inspiration from stablecoins like Tether and the Gemini Dollar, both widely used cryptos, China is actively taking steps to develop and then replace its paper currency with a digital version. Upon release, this new digital currency will immediately become the largest by market cap and volume overnight. With its 1.4 + billion population and GDP of $27 trillion, any monetary policy China adopts will be felt not only locally but internationally as well. There will be tremendous pressure for neighboring countries to accept the new digital yuan and embrace the new financial infrastructure. As such, this could be a strategy for China to distance itself from USD’s economic dominance.
Conversely, Facebook’s proposed stablecoin Libra is stuck in the mire of congressional approval. It is highly unlikely to be approved in its current incarnation, similar to the issues Paypal struggled with initially. There is a multitude of problems stemming from it “competing” with the dollar and the added challenge of overcoming public scrutiny stemming from its Cambridge Analytics scandal of 2019.
Meanwhile, the US is taking small steps to update its current aging settlement network. Expected to debut sometime in 2024, “FedNow” is an initiative to allow instant payment and settlement from the Federal Reserve, essentially creating an in-house real-time payment network. Details have been scarce, and there is no confirmation that it will run on a blockchain, but speculation is rampant. Google has weighed in as well and is encouraging the Fed to follow India’s example in implementing a similar real-time payment network. The company has gone so far as to propose an API that would allow non-bank entities to build applications utilizing the FedNow protocol.
In addition to its push for blockchain advancement, China has already surpassed the US in other tech sectors. 5G has been the sirens call for both consumers and component developers alike. Qualcomm, Ericsson, and Quorvo have all heavily invested in and are developing this next generation of wireless communication. China has had functional 5G plans since October. The US technically has 5G coverage through the major cellular providers, but service is spotty and at best.
As it struggles to compete in certain areas, the US is banning competition from Chinese goods and services due to security concerns.
Tik-Tok owned by a Chinese company – Banned by the US Army
Drone maker DJI based in China – Facing bans in the US
Huawei based in China has sold more phones than Apple – Sanctioned by the US
WeChat owned by the Chinese tech giant Tencent – Curiously not banned. Yet.
Despite the current trade issues with the US, the Asian subcontinent is humming with new developments and infrastructure. China has always represented a “sleeping dragon,” a known entity with massive potential. From its push from blockchain development to its dominance in the tech sector, this dragon seems to be finally waking up.