On October 24, 2019, Chinese President Xi Jinping was reported to lavish praise on the promise of blockchain technology arguing that it is imperative for China to accelerate its development. According to a local Chinese news agency, he said: “We must take the blockchain as an important breakthrough for independent innovation of core technologies, clarify the main direction, increase investment, focus on a number of key core technologies, and accelerate the development of blockchain technology and industrial innovation.” He also emphasized “the role of blockchain in promoting data sharing.”
A day earlier Facebook’s Mark Zuckerberg was grilled by politicians on his Libra project and he tried his best to argue if Libra failed China would simply launch its own competitive initiative. Ohio Congressman Anthony Gonzalez did not buy Zuckerberg’s argument: “What I don’t think is the right frame is, ‘If Mark Zuckerberg and Facebook don’t do it, Xi Jinping will do it.’ This isn’t Mark Zuckerberg versus Xi Jinping. I think that’s totally different. Framing that way, in my opinion, is somewhat misleading to me.”
Despite the obvious self-serving nature of his China references and likely disdain for China given Facebook has been banned in China for over a decade, Zuckerberg is correct in recognizing a potential long-term threat from China. Tied to its clear lead in 5G – by way of Huawei, achievements in AI computing, and long-ago implemented digital payment ecosystem, China is developing a real-time tracking system for all of its citizens – with the potential of exporting such capabilities to other countries and even deploying them outside of China to non-citizens. Setting up its own national digital currency may actually be beside the point.
Indeed, blockchain technology may not even be needed by President Xi Jinping to create a permanent record of all citizen interactions. China may possibly use blockchain technology or distributed ledger technology for grandiose tracking plans, or it may ultimately not bother given possible security and scalability challenges with such nascent technologies.
Whatever the direction ultimately taken by China, the takeaway from President Xi Jinping’s recent comments is clear – China will invest nationally in new technologies such as blockchain whereas the United States will largely stay on the sidelines and rely on private companies to innovate and deploy new technologies – which is actually Zuckerberg’s argument for allowing Libra to proceed.