China Looks To Overtake The US As The Leader In International Technological And Financial Supremacy
The United States of America has been at the forefront of most of the technological innovations be it the space race or the latest quantum supremacy achieved by Google. Even on the financial end, the US Dollar is still the main barter for international trade. But, with the start of the 22nd century, there is a certain shift in world power from West to East, and China, the world's most populated state is staking its claim to become the next world superpower.
The world is rapidly becoming more tech-oriented and almost every aspect of our lives is governed by these innovations that came in just the last few decades. The biggest impact that technology has had, is upon our financial ecosystem, where most of our banking needs can be fulfilled right from our smartphones. Although the financial system has adapted to the changing times, it only has progressed in terms of ease of use and accessibility to numerous services, the core of our monetary system has remained the same.
We have been following the same fiat system since 1972, which over the years has proven to be flawed which can be easily manipulated by the authority for momentary benefits, but leads to a long-lasting sequence of debts and inflation. The failure of the fiat system is evident from the great recession in 2007 as well as the failure of the Venezuelan state brought upon them by corrupt governments and hyperinflation.
In 2009, right after the great depression an anonymous person or a group uploaded a white paper with a new form of a monetary system called Bitcoin. The white paper described that the new peer-to-peer digital currency will be self-sufficient and won't require any authority to maintain the network. The technology which powered the network is called blockchain, a decentralized system of maintaining data on a publically accessible ledger.
Bitcoin has attracted a lot of attention after it peaked at all-time high prices of near $20k in 2017 and people started talking about the underneath technology of blockchain.
The League of Supremacy
The US has been at the forefront of technological innovation mostly because of its support for the private sector, which is why some of the leading tech firms like Apple, Facebook, Google and Amazon all come from the US. However, it did miss a beat when it comes to realizing the potential of blockchain technology. Although almost all countries were skeptical of cryptocurrency the US seemed extra cautious because of which many early blockchain and crypto firms had to shift their base from the US to other countries with less tight regulatory scrutiny.
China also had quite a similar stance towards cryptocurrency but realized how Blockchain can become a potential tool in not just enhancing its banking sector but give them more control over the flow of currency in the country. They started working on a national digital cryptocurrency issued by the central bank of China.
On the other hand, the US even though it gave way for heavily regulated crypto services, never realized the larger picture the tech is going to play in maintaining world dominance.
Facebook announced its universal digital currency called Libra this year, which had quite a similar working structure to that of Chinese digital currency. However, it faced criticism from all around the world including the US regulatory bodies. Regulators believed Libra would become the financial sovereignty of the US because a private company should not have control over the flow of money.
During the last congressional hearing of Libra, Mark Zuckerberg made a startling comment saying that if Libra won't get a nod for the go-ahead, the US would miss an opportunity to be the world leaders in the coming digital financial age, and some other country would pounce upon the opportunity.
It turned out the Zuckerberg was not far from the truth as China has been closely monitoring Libra's progress right from its announcement. Just a day later Chinese President called for accelerated adoption of Blockchain tech and become a world leader in the industry.
The announcement of the president came just before the expected launch of their national digital currency slated to go live by the end of this year or early next year. China being an authoritarian state makes it easier for them to implement any changes rapidly, and that's what happened. Just within a week, China decided not to ban Bitcoin mining in the country which is responsible for 60% of the total Bitcoin mining. Earlier it was speculated that China might ban Bitcoin mining. The state-owned news publication called Bitcoin one of the successful use cases of Bitcoin.
Trade War and Diminishing Popularity of the Fiat System
There has been an ongoing trade war between China and the US, where the US banned one of the largest Telecom hardware maker Huawei in the US, and increased tariffs on Chinese goods and the Chinese responded with the same.
The US has a great monopoly in the international market because of the US dollar, and this has become a motivation point for the Chinese to form a digital currency that can replace the US dollar in the international trade market.
Given the diminishing popularity of the Fiat system and the advantage of blockchain-based digital currency both in terms of monetary advantage and the ease of operation, the digital financial ecosystem powered by blockchain is going to become mainstream for sure. The US needs to really buckle up its efforts to prepare for the coming times or otherwise, China is looking to overtake it in world supremacy.