“We must take the blockchain as an important breakthrough for independent innovation of core technologies, clarify the main direction, increase investment, and accelerate the development of blockchain technology.”
Those aren’t my words. That’s a quote from Chinese President Xi Jinping in 2019. And in the years since, China has certainly heeded his call.
Promotion of blockchain innovation was officially incorporated into China’s most recent Five-Year Plan. China has also developed a Blockchain Service Network — a “one-stop shop” for companies and governments to deploy blockchain-based applications in the cloud. And equally critically, they are training the workforce they need to make these efforts succeed, having recently launched a national blockchain research center, which aims to train 500,000 blockchain professionals.
This is sobering news for America, since blockchain has the potential to transform all aspects of our society. While most of us are familiar with blockchain because of its role in facilitating cryptocurrency transactions, this is simply a one-use case among many. The fundamental concept of a blockchain is the creation of an immutable, distributed ledger that can track and record transactions and data, all without external oversight. From self-executing “smart contracts” to tracking physical shipments with unprecedented transparency, blockchain is about to revolutionize how the world conducts business.
If China succeeds in dominating the underlying infrastructure behind these innovations, the Chinese Communist Party will be able to exert unprecedented influence over the global economy. When the Internet took off in the 1990s, nobody could imagine how much it would change our lives. But fortunately, American innovators were at the forefront of that revolution — a reality that continues to pay dividends for our country to this day.
The good news is China’s leadership is not preordained. To the contrary, it faces stiff competition from the U.S. For all of China’s investments, American blockchain entrepreneurs still lead the world.
One of the questions I get asked most often in my role as the top Democrat on the House Select Committee on the Strategic Competition Between the U.S. and the Chinese Communist Party is whether we can outcompete it. My answer, for many reasons, is a resounding “Yes!” The U.S. brings many advantages, but chief among them is our capacity to innovate, embrace disruptive technology and responsibly regulate those technologies in a way that protects society.
This three-part formula is the recipe for American success, and blockchain itself fits neatly within this pattern. In fact, scientists Stuart Haber and Scott Stornetta discovered the foundational basis for blockchain right here in America, nearly 20 years before Satoshi Nakamoto turned it into the code for bitcoin.
American companies are also among the most innovative users of blockchain technologies — creating tools that do everything from combating deepfakes to creating traceable supply chains.
Our responsibility now is to continue to develop responsible regulations for blockchain, including most immediately with respect to cryptocurrency, so that the U.S. will remain home to the deepest, most transparent markets worldwide.
Just as we have done in becoming pre-eminent in traditional equities, bonds and futures, we should build toward deep, liquid, fair and transparent markets for digital assets. That’s why I supported the FIT21 Act last year. Our centrality to traditional financial markets is key to our national security, and we must recreate this winning model for cryptocurrency.
The stakes could not be higher, both for our nation’s prosperity and our values.
While the beauty of blockchain rests in its power to decentralize, China wants to flip blockchain’s purpose on its head and use it to centralize authority with the Chinese Communist Party. This explains why, even as China has embraced many uses of blockchain, it has tried to ban cryptocurrencies it doesn’t control entirely.
The party is eager to use blockchain as a tool for surveillance or as a potential means of weaponizing international payment systems against the dollar. It is less eager to embrace uses that could threaten its own authority. Let’s use that fear of decentralization against them.
The Chinese communists have no answer for America’s tried-and-tested strategy of innovation, disruption and responsible regulation. If we embrace the opportunity to lead in blockchain innovation, and do so in a responsible manner, our prosperity and security can be safeguarded for the next generation. But if we don’t, we will cede the field to our adversaries and be left behind.
Blockchain can be the building block for something great. It’s up to us whether we seize the opportunity or pass it up.
Raja Krishnamoorthi serves as ranking member of the House Select Committee on the Strategic Competition Between the U.S. and the Chinese Communist Party.
