Why the "China Banned Crypto" Narrative is Misleading & Harmful to U.S. National Security
If you’ve been in the crypto industry for a while now, then you undoubtedly lived through many days where all crypto-assets are all at least 10% in the red with almost every major media outlet saying it’s because the Chinese government “banned” cryptocurrency (18 times at the time of writing). Then the talking heads go onto CNBC either saying that this is proof other major governments will ban it too, or that this is because China is opposed to open and free markets.
Although it is true the Chinese government is generally skeptical of open and free technologies operating within their own borders and out of the control of the CCP, it is a complete falsehood to say that China does not understand the benefits of blockchain technology or digital currency.
China definitely does understand the benefits of blockchain technology and digital currency. The CCP is heavily investing in the research and development of these technologies. China even went as far as to list blockchain technology as a central part of China’s 2035 plan which aims to make China the world’s sole dominant superpower by 2035. In fact, CCP Chairman & “President for Life” Xi Jinping said during a 2019 speech covered by the Chinese government’s propaganda arm, CCTV, that China should “seize the opportunity” that blockchain technology presents. They publicly stated that areas such as energy, medicine, and supply-chain were compelling use cases. China has already rolled out blockchain sandboxes for major cities such as Shenzhen, Shanghai, Guangzhou, Suzhou, Chongqing, Hangzhou, Beijing, Chengdu, and Xiong.
In February of 2021, less than a full year after China launched their long-anticipated Blockchain Service Network, China’s BSN had cross-chain compatibility for Ethereum, EOS, Tezos, NEO, and Cosmos. All of these blockchains are backed by tokens, which are cryptocurrencies. While China does crackdown selectively on technologies offered to their own citizens, this has more to do with the communist regime’s need for control over their people and their whole economy in order for them to remain in power.
In April of 2020, China launched the National Blockchain and Distributed Accounting Technology Standardization Technical Committee. The companies on this committee may sound familiar to those in the NatSec community or investors investing in Chinese technology stocks; Huawei, Baidu, Tencent, JD.com just to name a few. Many of these companies have ties to the Chinese military and intelligence agencies. China has publicly begun working on projects using blockchains such as smart cities, government record-keeping, supply-chain logistics, digital identity among other use cases. It is safe to say that China has also begun to look into ways blockchain technology can enhance weapons systems and other defense use-cases. China has also begun to look into ways blockchain technology can give them an advantage over the West in international trade and diplomacy.
With all of these simple facts, it is clear that the U.S. government’s complacency and cognitive dissonance are further reinforced by statements from the Chinese government and state media about “banning crypto”. It is vital that the industry and innovators make the distinction between China banning technology for their citizens, and the idea that this means China is opposed to blockchain technology and the tokens that underlie many of the blockchains their government is currently innovating with. All of this combined with the way many U.S. regulators and politicians are viewing and approaching these technologies is extremely concerning. The U.S. urgently needs to create an industrial policy for the blockchain industry and begin to put forward public-private partnerships that benefit our nation’s crippling infrastructure and vulnerable digital infrastructure. The U.S. needs to ask themselves whether they want China’s values or our values reflected in the systems of the future.
