EDITOR NOTE: The international SWIFT payment system has dominated the flow of global trade for decades, not only privileging the role of certain countries in cross border transactions but also buffering America’s monetary hegemony, the dollar reigning supreme. China has begun disrupting that flow as it unleashes various iterations of its own Digital Currency Electronic Payment (DCEP) along with its own central bank digital currency. The US is far behind this new development, giving China a first mover advantage in supplying the world with a speedier, more efficient, and regulated means for cross-border transactions. Having led the world in technological innovation, America, surprisingly, has fallen behind--decoupling from the technological race that will define global dominance in the years to come.
During the second presidential debate in 1992, candidate Ross Perot warned of a “giant sucking sound” of jobs leaving the United States for Mexico if the North American Free Trade Agreement (NAFTA) was to enter into force. This past year, you may have heard a giant decoupling sound as the economies of the United States and the People’s Republic of China went their separate ways. It is no secret that after two years of a trade war, ongoing bans on certain U.S. exports to Chinese technology companies with links to China’s military, bans on the use of Chinese social media like WeChat and TikTok in the U.S., and denials of Chinese investments in U.S. companies, the two countries are at economic and geopolitical loggerheads.
The Chinese authorities, through the country’s Made in China 2025, have invested in a number of leading Chinese technology companies to dominate the future of 5G, artificial intelligence, genomics, robotics and semiconductor chips. The Chinese have used state-owned enterprises to bet on winners to directly take on U.S. big technology companies. One area of overt competition is in the creation of a central bank digital currency (CBDC).
This post is part of CoinDesk's 2020 Year in Review – a collection of op-eds, essays and interviews about the year in crypto and beyond. James Cooper is Associate Dean, Experiential Learning and Professor of Law at California Western School of Law in San Diego.
For years, China has banned cryptocurrency projects, outlawed exchanges and even blocked industry meetings, while figuring out how to use the disruptive technology for a sovereign-backed central bank digital currency to further centralize power in Beijing. This past year, the People’s Bank of China has rolled out its Digital Currency Electronic Payment (DCEP) initiative with a major pilot implementation project underway. Several lottery efforts to promote the DCEP were undertaken and a business-friendly, blockchain-services network was added.