Beijing has set itself an ambitious goal to be the world leader in blockchain technology by 2025, a mere three years away from today. In an October 2019 seminar at the Chinese Politburo, the decision-making body of the Chinese Communist Party (CCP), President Xi Jinping identified blockchain as a key area of technological breakthrough for China; he was recorded as remarking that the technology was of strategic importance to the nation.
This was followed by a policy change from the National Development and Reform Commission (NDRC), which has broad administrative & planning control over the economy of the People’s Republic of China (PRC). In April 2020, the NDRC incorporated blockchain technology into the scope of “new infrastructure development” for the first time. A year later in 2021, China’s State Council published a blueprint for the development of the national digital economy by 2025. In this plan, blockchain was once again labeled as a “key digital technology” – along with artificial intelligence, big data, and cloud computing.
This rapid pivot towards blockchain technology has been reflected in Chinese fiscal policy as well. The PRC’s central bank has embraced digital currencies, rolling out their own version often referred to as the “digital yuan.” In other practical terms, Beijing’s Blockchain Services Network (BSN), a state-backed blockchain company, announced in January 2022 that it will launch infrastructure to enable the trading of nonfungible tokens (NFTs). BSN will reportedly launch its NFT infrastructure on modified blockchains that will require verification of real user identities and create a backdoor for Chinese regulators.
The end goal for Beijing is simple, yet ambitious: to establish the PRC as the world leader in the blockchain technology industry by 2025, and to expand to a complete blockchain ecosystem by 2035.
These lofty goals are not strictly the product of so-called ‘Xi Jingping Thought’ or a desire to prove the superiority of Beijing’s political-economic model. Recent reports indicate that, across all continents, Asia stands to realize the greatest economic benefits from the expansion & utilization of blockchain technology. In terms of individual countries, blockchain could have the highest potential net benefit in China, to the tune of some $440 billion USD in terms of traceability & provenance.
Against these recent developments from China, one might have expected a mirrored behavior from Washington. However, that has not yet been the case under the current or previous administrations. Just this past March, the US’s President Biden issued an executive order regarding a ‘whole of government approach’ to the cryptocurrency industry. “The United States must maintain technological leadership in this rapidly growing space, supporting innovation while mitigating the risks for consumers, businesses, the broader financial system and the climate. And, it must play a leading role in international engagement and global governance of digital assets consistent with democratic values and U.S. global competitiveness,” a White House fact sheet announcing the directive said.
In practice, Biden’s executive order essentially mandates several federal agencies & bodies to produce various reports & answer specific questions, which may or may not be taken into consideration as his administration considers a future cryptocurrency policy. However, what cannot be overlooked is that this initial executive order signaling DC’s aims towards the blockchain sphere is solely focused on the financial aspect of blockchain technology, specifically cryptocurrency & its usage as a financial asset. The other 99% of blockchain applications have continued to fly under Washington’s radar.
Biden’s current ‘’whole of government’’ approach is not a ‘’whole of blockchain’’ approach; this is where the US is getting behind the 8-ball compared to Beijing’s more holistic, inclusive approach which focuses on the strategic application of blockchain technology in the whole of society. Xi Jingping isn’t looking to safeguard a payments system or a domestic brick-and-mortar financial industry; the PRC is developing (and implementing) a plan to utilize blockchain tech not just for domestic purposes, but as soft-power leverage.
Additionally, as mentioned earlier regarding NFTs, Chinese blockchain technology is being constructed with built-in backdoors for government access. There have been repeated, similar concerns with the usage of Chinese technology in the west regarding secret backdoors allowing the PRC to collect data & intelligence surreptitiously in everything from mobile devices to TikTok; if Chinese blockchain applications are the only options available, western consumers & governments may face the undesirable option of choosing between security & convenience.
Although the desire to maintain a unipolar world may no longer be a policy objective in Washington, and there are many lessons we can learn from the Chinese blockchain initiatives. All that is necessary is adequate government policy and smart regulation. US blockchain success will depend on a regulatory policy environment that provides clarity, allows for growth, and keeps the industry accountable. These are no-nonsense principles which should see bipartisan acceptance on both the state & federal level.