Smoke, Mirrors, & Blockchains: How the CCP Plans to Use Blockchain to Surpass the United States by 2035
While the United States Federal government continues to grapple with how cryptocurrency and blockchain technology should be regulated through the application of decades-old purely financial regulatory frameworks (securities, commodities, etc.) created for the paper-based markets of the past century, China’s Communist Party has continued to be several steps ahead of the US in the development and implementation of blockchain technology for their own national interests both domestically and internationally. They’ve been careful and thoughtful while considering the risks and benefits of each and every aspect of the emerging blockchain ecosystem. China’s government banning the use of private and uncontrollable capital for their own citizens is in line with the values of the CCP and the structure of their authoritarian form of government that relies on the absolute power of the state.
The CCP’s Blockchain Service Network (BSN) uses blockchain technology for financial and non-financial purposes such as smart cities, license plates as NFTs, critical supply-chain logistics, digital identity solutions, etc. The BSN has increased its ability to facilitate complex financial transactions through its mCBDC bridge and the integration of the BSN with large state-affiliated trade finance arms. The BSN is controlled and developed by a “private” company, Red Date Technology, which also happens to be a Chinese military contractor. The Chinese Government uses its BSN to expand its ability to surveil, control, and utilize for its advantage in areas that the CCP is looking to consolidate control over.
The digital Yuan and the Blockchain Service Network are central parts of China’s Belt & Road Initiative (BRI). The CCP aims to create the base-layer infrastructure for international transactions free from SWIFT and Western sanctions. This past September, the BSN ‘soft launch’ in Hong Kong and Macau went live, adding to the Digital Yuan rollout in both semi-autonomous regions in an effort to push Hong Kong to abandon the Hong Kong Dollar in favor of the Yuan. China has already expanded its use of its BSN beyond its borders as a foreign policy tool. The BSN has already begun expanding into areas in which China is attempting to expand its influence, such as Myanmar, Russia, Uzbekistan, South Korea, Singapore, and Turkey.
The BSN network has cross-chain compatibility that enables smart contract features and the seamless movement of value or data and has already successfully integrated its network with over 20 permissionless and permissioned blockchain networks such as Ethereum, Solana, Polkadot, Tezos, Corda, Algorand, Hyperledger Fabric, ConcenSys Quorum. This broad selection of blockchain networks at the disposal of those who develop applications on the BSN is an extremely attractive feature for all companies, countries, and organizations that seek to utilize blockchain technology on a larger scale and in real-world use-cases.
Meanwhile, the US does have a significant amount of blockchain innovation taking place in the private sector, but with a sizable regulatory cloud hovering overhead which is hindering the ability of innovators’ to implement blockchain technology for use-cases beyond just the financial applications that Congress and the Federal government have spent the majority of their time focusing on. While the US has finally begun to develop a more cohesive and comprehensive strategy concerning other emerging technologies such as AI, IoT, and quantum computing, we have yet to acknowledge the national security importance of blockchain technology, even as we attempt to regulate blockchain innovators who chose to operate within our US borders, despite all of our nation’s shortcomings in terms of regulatory clarity.
Given that this issue is one of critical national security importance, this issue area must remain apolitical and non-partisan. The US must seek a balanced industrial policy for public-blockchain technology and cryptocurrency through government research, investment, and utilization, not just endless conversations led by career investment bankers and securities lawyers with a siloed perspective of one the most disruptive technological innovation in human history.
