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Blockchain in China: global repercussions

Blockchain en China

Two days after Mark Zuckerberg was dragged before the U.S. Congress to be questioned about plans for the Libra digital currency, Chinese President Xi Jinping made his first public statements about blockchain in China.

“It is necessary to take the blockchain as an important advance for the independent innovation of the basic technologies. We must clarify the direction, increase investment and accelerate the development of technology and industrial innovation towards blockchain technology.”

Xi’s comments are simple – blockchain technology is very important for the future and China plans to be the world leader.

Although many things have happened since Bitcoin was born, it is increasingly evident that states are beginning to pay attention. Each of these sovereign countries can choose to do one of three things:

  • Ignore Bitcoin, blockchain technology or digital assets.
  • Work actively against Bitcoin, blockchain technology, and digital assets.
  • Embrace Bitcoin, blockchain technology, and digital assets.

Until recently it seemed that most countries would choose to ignore the cryptographic industry, some would work to nullify its effects on the economy, and only illegitimate governments or sanctioned, indebted or intervened nations would choose to embrace this innovation.

But all that changed last week with the comments of Chinese President Xi.

China is the largest country in the world, with almost 1.4 billion people. Over the past few decades, it has grown from a country that depended on intellectual property theft to a country that is pushing the pace of innovation through artificial intelligence, computing, CRISPR research, and many other technological frontiers.

But it’s not just the size of China’s population that’s important. They are also willing to work. Last year, the famous investor Sequoia Capital Mike Moritz wrote an opinion piece in the Financial Times entitled “Silicon Valley would be wise to follow China’s example”. In it, he highlighted this work ethic:

“Here, senior managers show up to work at 8 am and often don’t leave until 10 pm. Most of them do this six days a week – and there are plenty of examples of people doing this seven days a week. Beyond holidays like the Chinese New Year and the October national holiday most end up rejecting an additional handful of vacation days. Some technology companies also provide a rental subsidy to employees who choose to live near the corporate headquarters.”

Of course a company, or its employees, do not have to work 6-7 days a week in order to drive the pace of innovation. But any group that puts more effort into something is likely to make more progress.

There is a strong contrast between the United States and the blockchain in China, with bitcoin and digital assets. In the United States everything has been too negative about various aspects of this industry.

  • The U.S. Congress and Senate have publicly attacked one of the world’s largest companies (Facebook) over its plans to create a digital currency (LIBRA) and build an infrastructure to embrace this new technology.
  • The SEC has spent millions of dollars and hundreds of hours chasing new companies that have chosen to implement this new technology, while refraining from issuing new rules or guidelines to clarify regulatory uncertainty.
  • The U.S. government also worked actively to manipulate the price of Bitcoin in 2017/2018 by introducing future products in order to deflate the price.
  • The IRS has provided clarifications surrounding digital assets that maximizes tax revenues, but drastically discourages innovation and market share.

But all this was overshadowed by President Trump’s message and his administration.

The control over the centralized dollar, key to the issue

The United States has benefited greatly from control of the world’s dollar reserve, including the ability to print money and create weapons against adversaries who historically have had the dollar.

There are two new aspirants to the status of king who so far has had the dollar.

The first is Bitcoin and the second is the digital currency with blockchain in China (now called DCEP). Bitcoin is a digital coin that is completely transparent and is not controlled by anyone. You don’t have to worry about anyone inflating the coin away, censoring or seizing its wealth when you use Bitcoin. A fairly powerful system for the millions of people around the world who don’t live in the United States.

The second dollar challenger is much more recent. China has been studying digital coins, and in particular digital coins issued by central banks, for at least the last 5 years. They have recently begun to speak publicly about their plans to launch a Chinese digital coin.

Although there is definitely not all the information, it is becoming evident that China is taking this seriously. We have President Xi’s comments since last week. So today, the vice president of the China Center for International Economic Exchanges confirmed the specific plans around a national digital currency (DCEP).

Entonces, ¿qué es exactamente esta moneda digital? La respuesta corta es que nadie está seguro todavía. Hay un montón de especulaciones que circulan, esta es parte de la información más válida y de más alto nivel:

DCEP

But China will not only adopt blockchain technology for a digital national currency. Just after President Xi’s comments, there was an avalanche of advertisements and information coming out of China. Some of them include:

The contrast is clear, China is willing to embrace one of the most important technologies of the future, while the United States is in regulation and shutting down any innovation close to this technology as LIBRA.

The future will be automated, global, and largely decentralized. There will be a shift in the power of corporations and governments back into the hands of individuals. The first countries to allow this change will have the greatest chance of prospering in the new world.

And in the meantime the value of Bitcoin will continue to grow, thanks to countries that favour innovation.

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