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In a speech late last month, Chinese leader Xi Jinping declared blockchain “an important breakthrough,” and promised that China would “seize the opportunity.” He detailed the ways the Chinese government would support blockchain research, development, and standardization. The significance shouldn’t be underestimated. Xi is the first major world leader to issue such a strong endorsement of the much-hyped, and much-maligned, distributed ledger technology. His words are already having a major impact. Like the internet, blockchain is a powerful tool that can nurture freedom and competitive innovation, or reinforce concentrations of power. Those who favor the former vision cannot take it for granted. The United States’ leaders are doing just that.
Kevin Werbach is a professor of legal studies and business ethics at the Wharton School, University of Pennsylvania, and the author of The Blockchain and the New Architecture of Trust.
Xi’s speech unleashed a cascade of activity. Propaganda organs such as People’s Daily and Study the Great Nation, the mobile app that teaches “Xi Jinping thought” to Communist Party members, immediately launched a wave of educational content. Cities marshaled funds for subsidy programs. Censors declared that calling blockchain a scam on social media was henceforth forbidden. Chinese investors rushed to buy any stock vaguely associated with blockchain, reminiscent of the mini-bubbles in Long Island Blockchain and Kodak during the initial coin offering frenzy of 2017. The price of bitcoin shot up 12 percent in the day following the speech.
China’s already significant blockchain activity will be supercharged. Over 500 blockchain projects, from many of China’s most powerful companies, have already registered since last year with China’s Cyberspace Administration. The People’s Bank of China (PBOC) is stepping up efforts to launch a Digital Currency Electronic Payment System (DCEP), which could replace cash with a blockchain-based solution. It would make China the first major economy to adopt a native digital currency. China could then use DCEP to manage funding for its Belt and Road program of overseas infrastructure investments, extending its monetary sphere of influence.
Across the Pacific, the picture is quite different. Two days before Xi’s remarks, Mark Zuckerberg faced a hail of criticism on Capitol Hill for Facebook’s proposed Libra digital currency. Several partners in the venture had already pulled out after threatening letters from Democratic senators and sharp criticism from Federal Reserve Board chair Jerome Powell. And the skepticism isn’t limited to Libra. This summer, President Trump declared himself “not a fan” of cryptocurrencies, which he described as “based on thin air” and likely to “facilitate unlawful behavior.” The Securities and Exchange Commission is stepping up enforcement actions in the area. In October it blocked messaging platform Telegram from issuing $1.7 billion in cryptocurrency tokens over compliance with securities laws.
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