The FinTech Arms Race?

Written by Malik Corbett

Last Friday, President Xi Jinping of China said in a speech to the Communist Party of China Central Committee on the subject of blockchain, that the nascent technology would “play an important role in the next round of technological innovation and industrial transformation.” According to the South China Morning Post, Xi was quoted that blockchain “should be made a key part of the country’s innovation programme, and investment in the sector should be increased.” 

Although President Xi’s announcement last Friday was big news for the crypto space, in 2017 The People’s Bank of China (PBoC) announced a 5 year plan to advance technologies such as blockchain and cryptonetworks to be implemented in the country’s financial system. In contrast, The United States have been slow to respond to the rapidly changing innovation and developments in the blockchain space. In fact, the U.S. authorities have been a roadblock for entrepreneurs here in the states. The approach by the two global superpowers to the nascent but promising technology couldn’t be more different. 

Although both countries fear that public digital currencies poses a threat to their financial system (rightfully so)  and loosen the government’s grip on monetary policy both domestically and abroad. The path that both countries have taken couldn’t be more different and the implications for global financial system over the next 10-20 years can not be overstated. So far, the Trump administration has been skeptical of cryptocurrencies. Furthermore, Mark Zuckerberg’s poor performance last week on October 23rd before the U.S. Congress was not helpful to the industry.  

Today we are going through a global reorder and America’s leadership in the new world order is not guaranteed. In fact, there is a growing chorus calling for an alternative currency or a basket of currencies to replace the U.S. dollar as the world’s reserve currency. In a world were China controls the global financial system is a world that clashes with western philosophy of free speech and individual freedom; so the stakes couldn’t be any higher. 

So far, the U.S. government is like an ostrich; head in the sand. The dysfunction on Capitol Hill has stymied some of our best and brightest entrepreneurs because of the lack of clarity around regulation. Instead of embracing this powerful technology and implementing sensible regulation, the government has been paralyzed by fear that monetary control will switch from government, in particular the U.S. government to private companies and individuals. Although the concern is real, as the old adage goes “throwing the baby out with the bath water” will be detrimental to the United States global standing and financial health.

Unfortunately, the United States doesn’t have the luxury of time. China is fervently building the Digital Silk Road which is a subset of the Belt and Road Initiative (BRI) to enhance digital connectivity abroad, specifically throughout Eurasia and Africa. Blockchain technology and cryptonetworks will play a vital role in digitally connecting participating countries in the BRI. It’s not hard to imagine China creating a private blockchain-based cryptonetworks to connect member countries of the BRI using China’s digital yuan as the native network currency. In fact, a recent report by the crypto publication; The Block, stated that the Vice Chairman of China Center for International Economic Exchanges or CCIEE, Huang Qifan, said that he believes China will be the first “central bank in the world to issue sovereign digital currency” at the Inaugural Bund Summit 2019 in Shanghai this week.  

The U.S. and China rivalry has gone beyond a trade war and has spilled out onto the pivotal fintech sector. The battle between the U.S. and China in the fintech sector, will be one of the key deciding factors that will determine the  winner of this global rivalry.

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