By Darren Parkin
There’s a massive war happening that is going to change our future. It’s not the war that might first come to mind, but rather the new Cold War that’s establishing itself between two global superpowers: the US and China
You see it’s affects on many levels and, ultimately, it’s the reason that you will see the dominance of cryptocurrencies within the global financial system. Indeed, it is assured for many reasons, as agreed by most credible economic and financial experts.
They know digital currencies make sense in our increasingly-tech driven world; they know that they are a store of value and medium of exchange; they know that digital assets can help institutional and individual investors diversify portfolios; and they know that Millennials, who are ‘digital natives’, are becoming an increasingly important market participants in the coming years, with the largest-ever generational transfer of wealth – predicted to be more than $60 trillion – from baby boomers to millennials taking place.
But there’s another key – and often overlooked – reason why cryptocurrencies are the inevitable future of finance: the intensifying battle between global superpowers, namely the U.S. and China.
Both nations are pushing to become the ultimate global dominant force militarily, politically, culturally and economically.
There is now almost universal consensus that the winner in the battle of the superpowers will come down to which country has superior technology.
The better tech the more sophisticated the military; the wider and more effective the political, social and cultural influence; and the more robust, adaptable and future-proofed the economy.
With the blistering pace of the digitalisation of everything in our lives, including money, it’s a given that China and the US are already engaged in a ‘digital currency space race.’
This begs the question: who is currently winning?
Earlier this year, the Beijing Winter Olympics were used by China to showcase its new digital currency.
The digital yuan had already been trialled in various cities across China last year, but the Games were the first time it has been piloted on a global stage with mainly foreign users. It was perceived as a success.
The People’s Bank of China’s new currency has many advantages for Beijing, besides speed and convenience. It means it will have even more powers to track and control the population and, importantly, it helps limit the impact of U.S. economic sanctions.
Plus, the digital currency, and the tech on which it runs, will help it maintain and grow trade links with Russia, which is currently in the pilot phase of its CBDC development and is expected to complete the development by early next year.
According to the Atlantic Council, 90% of governments around the world, representing 90% of global GDP, are actively pursuing their own central bank digital currencies (CBDCs).
As China is the first large, industrialised nation to launch a CBDC, it now has first-mover advantage.
Of course, CBDCs, whilst tech-driven, are different to cryptocurrencies.
But even in the crypto field, China seems to gaining significant ground again.
Blockchain analytics firm Chainalysis has recently released its 2022 Global Cryptocurrency Adoption Index detailing global usage of Bitcoin and other cryptocurrencies.
And despite last year’s ban from Beijing, China has returned to rank among the top 10 countries in the world for adoption.
In addition, new research from the Cambridge Centre for Alternative Finance shows that Chinese Bitcoin mining activity has quickly rebounded also. By September 2021, China made up just over 22% of the total global Bitcoin mining market, the research shows.
This suggests that the ban has been neither effective nor enforced by Chinese authorities.
Maybe they are, in fact, happy to have a thriving crypto currency now that the country’s CBDC is up and running? It seems likely to me.
Meanwhile, the United States is already one of the world’s most crypto-friendly countries.
It has the highest quantity of Bitcoin and Ethereum nodes, and financial regulators and lawmakers are clearly becoming more engaged.
Last month, President Joe Biden’s administration released a series of federal reports suggesting how cryptocurriences might be regulated in the coming year.
The fact that the government and regulators of the world’s largest and most influential economy is, clearly, hugely significant.
The US is also home to many of the world’s biggest and most advanced crypto firms and also some of the largest financial institutions, including BlackRock – a $10 trillion asset manager – which has recently partnered with a major crypto exchange to provide its institutional investors with access to digital currencies.
A couple of decades or so ago, Washington was fixated on the threat that China posed on the global dominance of the US.
But then, on the morning of September 11, Islamic extremists hijacked four commercial aeroplanes and crashed three of them into the World Trade Center in New York and the Pentagon in Virginia – and this quickly and dramatically shifted America’s focus.
Until relatively recently, the ‘War on Terror’ was front and centre, meaning that Washington was distracted away from China.
“It was an incredible geopolitical gift to China,” Kishore Mahbubani, Singapore’s former UN ambassador, has told NBC.
“It was a huge mistake for the United States to focus on the war on terror, because the real challenge was going to come from China,” said Mahbubani.
China’s GDP jumped from $1.2 trillion in 2000 to more than $14.7 trillion in 2020.
“While you were busy fighting wars, China was busy trading,” he noted.
With the stakes higher than ever as China gains influence, the US is not going to take its eye of the ball again.
For this reason, it will be pushing ahead with a fervent rivalry for dominance of the future of money, which is digital. In turn, this can only further encourage mass global adoption of crypto.
Despite the decentralised nature of blockchain technology and cryptocurrency posing a paradox for central governments, they cannot afford to shy away from it.
As such, the competing superpowers are major drivers for the crypto market now and in the future.
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