In the Race Over Digital Money, China is Leaving US in the Dust
It’s a topsy turvy world when Communist China is increasingly one step ahead of the United States in next-generation technological innovations for the global economy. Look no further than the haphazard, tone-deaf regulatory environment in today’s Washington, which seems as obsessed with cracking down on technology as it was with song lyrics 20 years ago. The progress of America’s best new tech innovators is either being squandered or suffocated at a moment when our economic engine desperately needs them to thrive. The next casualty might be digital currencies and blockchain.
China is enticing its population with the idea of a digital currency and nearly two million citizens have signed up for a $10 million digital yuan lottery. In contrast, the U.S. Department of Justice (DOJ) has released a muddled, 83-page cryptocurrency framework that fails to clarify the future of cryptocurrencies in the American economy. The cryptocurrency industry has waited in vain for a coherent regulatory framework, but the U.S. Securities and Exchange Commission (SEC) has made more of an effort to protect Chinese-owned assets than American ones.
The onset of the COVID-19 pandemic has exposed how embarrassingly outdated our national consumer financial grid has become. A staggering number of federal stimulus checks were issued on paper and mailed out, often to deceased people, and often with long delays. On top of that, the country is currently struggling with a national coin shortage. Traditional banks have become bigger while fintech innovation has been slower in the U.S. than in other developed markets. As a result, consumers have less choice and often less knowledge of what the market could really offer. Add with an unrestrained SEC swinging a hammer based on laws written a century ago, digital currency solutions don’t stand a chance.
China has been tenacious in the digital currency race. The People’s Bank of China (PBOC) has announced China must become the first nation to issue a digital currency in a globalized effort to displace the dollar with a digital yuan. Aside from the fact that this could allow China to dominate global currency markets, it would add leverage to its growing tech companies like Alibaba, Tencent, and WeChat. The Chinese-developed social media application, TikTok, which has become widely popular among American youth, already sparked a notoriously tense standoff with the U.S. government in allowing the app to operate in the United States. China technologies are undoubtedly growing a distinguished presence among American consumers. China’s rampant growth in both the economic and technological sectors is something critical to consider. As it pulls out all the stops for its companies to prosper, the United States must at least stop the bleeding back home. Empowering American fintech companies to excel in their innovative feats will only serve to bolster our national security.
In addition to a U.S. regulatory environment that supports technological innovation, we need concrete efforts from the U.S. government to create a digital dollar initiative that can successfully compete against the digital yuan. In addition to China, countries around the world are making headway with central bank digital currencies (CBDCs). According to Coin Insider, since China has announced its pilot program to test a CBDC, countries like France, Sweden, Switzerland, and Japan have begun testing their own CBDCs. A report from Deutsche Bank highlights how CBDCs could bring on a massive geopolitical shift in the near future. What are we doing about it?
Growing global competition means the U.S. must quickly adopt a regulatory environment that supports innovation in a world that is quickly transforming. We could see more crises in our future that require swift, immediate action based on technological innovation and enhanced economic security. As China works quickly to adapt to fast-paced, geopolitical changes, the U.S. must start running to keep up. In the words of JPMorgan Chase & Co. executives Josh Younger and Michael Feroli: “There is no country with more to lose from the disruptive potential of digital currency than the United States.” Let’s not blunder our way out of winning a race that we were born to win.
Wayne Brough is the President of the Innovation Defense Foundation.