1. China's Blockchain and Cryptocurrency Ambitions: The First-mover Advantage
- Author:
- Alice Ekman
- Publication Date:
- 07-2021
- Content Type:
- Policy Brief
- Institution:
- European Union Institute for Security Studies
- Abstract:
- China was initially cautious in the development and application of blockchain technology. Among the technology’s best-known attributes are the relative anonymity and immutability of the information, as every blockchain transaction has a digital record and signature that can be identified, validated, stored and shared. This technology could therefore become a double-edged sword for the Communist Party of China (CPC), as it goes against the government’s efforts to censor content it considers sensitive and, in more general terms, efforts to assert its cyber-sovereignty. However, after at first observing the emergence of blockchain technology with concern, China’s central government has increasingly seen it as an opportunity, as has been the case with most emerging technologies. Since the launch of the 13th five-year plan in 2016 and the release of the first White Paper on Blockchain Technology and Application Development by the Ministry of Industry and Information Technology the same year, the CPC has increasingly considered that blockchain could become an economic, political and geopolitical asset for the country, if ‘guided’ well. China has continued to shape its positioning on and conceptualisation of blockchain technology on a regular basis over the last 5 years: the China Blockchain Industry White Paper (1) was published in 2018, another White Paper entitled Blockchain Technology Application in Judicial Evidence Storage was published in 2019 (2) and the 14th five-year plan (2021–2025), released in March 2021, also refers to blockchain and cryptocurrency (see timeline diagram on page 7) (3). China’s unique approach to blockchain is conditioned precisely by this paradox, stemming from the decentralised nature of the technology and the highly centralised nature of the Chinese political system. While blockchain technology is essentially decentralised, regulations in China have aimed to guarantee state control over its development and application. As part of this dual policy, which is analysed in the first part of the Brief, the Chinese government has launched its own digital currency – the digital yuan. At the same time, it dislikes bitcoin, which relies on a truly decentralised type of blockchain. Although blockchain is best known for being the technology behind cryptocurrency, the Chinese government’s approach towards blockchain is very comprehensive, going far beyond cryptocurrencies. It promotes application of the technology in a variety of fields, ranging from energy conservation to urban management and law enforcement, and has strong ambitions to become the world leader in the field. In October 2019, China’s President Xi Jinping, speaking at a study session for members of the Politburo, declared that he wanted the country to be a ‘rule-maker’ on blockchain, suggesting that this technology will increasingly become a key arena in the country’s race against the United States for technological supremacy (4). Blockchain has become a fast-growing sector in China over the last two years. But is China likely to succeed in the global promotion of an alternative form of blockchain? This Brief answers this question by analysing the development of different applications at national level, before and during the Covid-19 pandemic, but also the emergence of international cooperation on blockchain and cryptocurrency.
- Topic:
- Science and Technology, Cryptocurrencies, and Blockchain
- Political Geography:
- China and Asia