Cypherium | Blockchain Good, Blockchain Bad
Many are crediting Bitcoin’s explosive rise in price to Chinese President Xi Jinping’s recent comments on the value of blockchain technology. While it is difficult to prove a direct, causal relationship between Xi’s professed confidence in the new-generation technology and bitcoin’s brief moonshot, the comments illuminated certain underlying, national dynamics of the current global economic system, the impact of technology on current political tensions, and the readiness of various blocs to accept the changes this new technology may bring.
To put these observations in their simplest terms, Erik Voorhees, investor and founder of ShapeShift, took to twitter:
While Voorhees’s statement is clearly tongue-in-cheek, it speaks to three critical aspects of this early stage of a new era in financial technologies. Firstly, this quip underscores that governments have espoused largely superficial positions on this complicated, new technology. Partially because the American Congress and its international cognates move at a permanently slow, bureaucratic pace, and partially because this technology is simply hard to explain and understand for the uninitiated, the advanced economies of most Western nations have had adopted a skepticism of blockchain technology devoid of nuance or any earnest attempt at recognition. On the other hand, President Xi’s championing of the technology has had a profound impact for a similarly two-dimensional sentiment.
China’s position, however, is plain in its acceptance of digital financial instruments, opposing the U.S. and others’ flat hostility. This is certainly a testament to the forceful trajectory of decentralization as a new era of technology that will impact our societies in vast and profound ways. How can a simple affirmation have such an incredible impact on the Chinese tech industry as well as the global crypto markets? In short, blockchain’s decentralized vision is a flood waiting to overtake the future. Regulators who try to stop-up this immense current do not halt the flow of its progress, but rather direct its geographical tendency. Pressure has long been accruing in the tense, politically tumultuous halls of Congress and various parliaments, and President Xi in recognizing this has welcomed the flow of decentralized capital and talent into his Asian bloc.
And as Galaxy Digital’s Mike Novogratz points out, we are already seeing the effects of this political decision-making take hold:
In his speech at the 18th collective study of the Political Bureau of the Central Committee in Beijing, Xi recognized blockchain’s capacity to innovate the fundamental technologies used to administrate our everyday lives, urging his country to seize the opportunity that this nascent technology presents. That opportunity, geo-politically speaking, refers to a recentering of the global financial order. Following the gold standard and the widespread economic upheaval of the first half of the twentieth century, given the Great Depression and the World Wars, the United States and the United Kingdom emerged as the arbiters of international economic interaction. In the same stroke that removed gold tethering from advanced economies, the Bretton Woods agreement placed the US dollar at the heart of interconnected central banking systems and monetary policies, making it a de facto global reserve currency. This, in addition to a stack of international financial instruments, either born of or controlled by the leadership of DC and Brussels, has made it so that the industries of high investment remain within the purview of the United States and the European Union.
Countries like Russia and China, which have the natural resources, talent, and scale to challenge this unilateral dominance, will not let this imminent chance slip through their fingers. Today, that means encouraging an open-ended and welcoming attitude towards the great shift already underway, which will deliver our slow, high-fee legacy finance system to a more democratic, digital future. There is still time for the US, UK, and EU to demonstrate good faith toward these technologies, but this would entail a paradigmatic shift in the regulatory attitudes expressed to date, and given the size of such a political project, the window for that is rapidly diminishing.
