West vs East: How America Can Win the Blockchain Arms Race

Author Tayler McCracken Author Tayler McCracken About Author Tayler McCracken is the Head of Content at 99Bitcoins, a leading publication that provides cryptocurrency education. With over 7 years of experience as a writer, analyst, researcher, and editor across... Author Profile Share Copied Last updated: August 12, 2024 23:40 EDT

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Civilization has always been forged by competition. Throughout recorded history, the societies that have consistently risen to prominence are those that have maintained an advantage over their counterparts, whether it be military superiority, political strengths, economic advantages, access to shipping routes, technological advantages, etc.

In recent history, we saw the space race between the Americans and the Soviets as they vied for space dominance and national jingoism. Then there was the arms race, arguably the most high-stakes and globally impactful competition mankind has ever found itself in. He who built the greatest arsenal decided the outcome of the war and many of the geopolitical events that followed. America’s military dominance throughout the post-war era and Cold War shaped the modern world as we know it.

Today, America enjoys financial and technological dominance as well. Financial superiority was achieved in many ways ranging from being a creditor during the war years to the

results of a victorious powerplay move for economic superiority dating back to 1944 with the Bretton Woods Conference. Technologically, America capitalized more effectively than any other nation from the dot-com boom and Silicon Valley has been dominating the proceeding technological race that continues to define this century.

America has done exceptionally well and is no stranger to competition and embracing innovation, though it now finds itself in another high-stakes competition, and the outcome isn’t looking favourable.

A Blockchain Arms Race has emerged as a pivotal battleground that is reshaping the future and directly impacting global economic supremacy. This race is not merely about technological innovation; it’s a complex revolution involving economic strategies and the quest for control over the next generation of financial systems and economic power.

Understanding the Blockchain Arms Race

In the digital age, where technology and geopolitics intersect with startling velocity, the “Blockchain Arms Race” has been at the forefront of global attention with central banks and governments around the world understanding the impact and importance of being a leader in this technological revolution. According to Reuters, 130 countries representing 98% of the global economy are now exploring digital currencies. This race is unfolding on a truly global capacity, at a scale in which we have never seen.

A Look At Countries Exploring Digital Currencies. Source: cbdctracker.org

The Blockchain Arms Race refers to the fierce competition between Western nations, led predominantly by the United States and Europe, and Eastern powers, notably China, India, and other emerging tech giants, to dominate the developing field of blockchain technology.

This technology, best known as the backbone of cryptocurrencies like Bitcoin and Ethereum, is about more than just digital currencies. It promises an evolution in how we transact, secure data, and establish trust in a digital world. The stakes are high, and the leaders stand to gain a significant edge in economic and technological leadership on the global stage.

Blockchain technology is positioned to redefine industries from finance to supply chains, healthcare, gaming, education and much more. Blockchain technology is the foundation for the Fourth Industrial Revolution, which aims to support a more transparent, efficient, and secure global economic system. Nations leading in this technology will benefit from economic advantages and wield considerable geopolitical influence, setting standards and regulations that will govern the digital economies of the future while holding controlling stakes in global financial infrastructure.

This burgeoning technology doesn’t just offer a novel means of transaction; it represents a fundamental shift in how we think about finances, ownership, data privacy, operations, logistics, and control. In the East, digital currencies have been seen as a way to circumvent traditional Western-dominated financial systems and gain a dominant position in a new economic model, while in the West, they are often viewed both as a threat to existing monetary order and an opportunity for continued economic dominance.

America’s Position in the Blockchain Arms Race

America, more than any other nation, stands at a pivotal crossroads and has appeared to freeze in apprehension. The United States has the most to lose if they fail to capitalize on this technology.

Their steadfastness is understandable as the wrong move has the power to either challenge and disrupt the dominance they currently enjoy, or if embraced properly, will allow the United States to continue to enjoy their economic position in power. Simply doing nothing is not an option and the United States has been heavily criticized for not only failing to embrace this technology, but for actively stifling innovation by regulating by enforcement and showing extreme hostility against a budding and promising industry, while also failing to agree on clear regulations and laws.

According to a developer report by Electric Capital, blockchain developers are leaving the United States at a rate of 2% per year. In 2017, 40% of blockchain developers were located in the United States, a figure that has dropped to just 29% as of 2023 as innovators, entrepreneurs, and builders in the space leave the States for more favourable regimes.

America understands the importance of embracing innovation more than any other country as the primary benefactor of the 2000s tech boom. To see their sub-optimal, and frankly, hostile approach to digital innovation is causing frustration and confusion among industry leaders as an obtuse approach is risking their privileged position on the world stage. Countries that were slow to adopt the internet revolution paid a price, and America is in peril of following a similar fate.

America’s position in this race is characterized by a blend of immense potential and complex challenges. On one hand, the country boasts a robust technological infrastructure, a culture of innovation, and a vibrant ecosystem of startups and tech giants constantly pushing the boundaries of what’s possible. These characteristics position the United States as a formidable contender capable of leading the blockchain revolution. The nation’s tech hubs, from Silicon Valley to Boston’s Route 128, are brimming with bright minds crafting the future of blockchain. Moreover, America’s strong intellectual property laws and global financial influence provide a fertile ground for blockchain’s growth and integration into the existing economic system.

These factors are well understood by pro-blockchain politicians such as the House of Representatives Majority Whip Tom Emmer, Representative Ritchie Torres, Senator Ted Cruz, Kirsten Gillibrand, Cynthia Lummis, former president Donald Trump, and others who have expressed frustration at the failure to support American blockchain innovation.

America’s vast potential to be a leader in blockchain innovation is being downtrodden if not downright suffocated by the efforts of anti-crypto politicians with vendettas being led by politicians such as Senator Elizabeth Warren and her “anti-crypto army” campaign, Representative Brad Sherman, SEC Chairman Gary Gensler, and others who feel cryptocurrencies pose more of a risk to US-dominance and it’s citizens than the nation stands to gain through adoption and integration.

The decentralized nature of blockchain stands in stark contrast to the centralized systems of power and control that have traditionally underpinned America’s economic and political institutions. Regulatory uncertainty, privacy concerns, and the nascent state of the technology itself present significant hurdles.

America’s approach to the blockchain arms race is under scrutiny, as balancing innovation with regulation, and competition with collaboration, requires a nuanced strategy that is yet to be fully realized.

Europe Takes the Lead

It isn’t just the East that America needs to contend with. Long-time allies in the European Union seek to capitalize on America’s fumbling and have assertively taken the lead in digital innovation. While Congress in the US still can’t decide on which agency should be regulating crypto and argue over whether Ethereum is a security or commodity, Europe pushed ahead and became the first global power to roll out crypto-assets regulation with the pioneering regulatory framework, the Markets in Crypto-Assets (MiCA).

The approval of MICA was a bold statement and a shot across the bow of other nations that Europe is positioning itself as a beacon of balanced and progressive blockchain regulation, aiming to foster innovation while protecting consumers.

Meanwhile, across the English Channel, the United Kingdom is carving out its own distinct path in the blockchain landscape. Post-Brexit, the UK has been on a relentless pursuit to redefine its economic and technological identity. This drive has seen the nation embrace blockchain technology with enthusiasm, surpassing America in certain facets of blockchain adoption. The UK’s strategy is multifaceted: fostering a dynamic start-up ecosystem, encouraging academic research in blockchain, and exploring governmental applications of the technology.

The UK’s approach contrasts with America’s more cautious and fragmented stance. While the US debates the intricacies of blockchain regulation and grapples with inter-agency jurisdictional disputes, the UK is also looking to position itself as a global leader in financial and blockchain adoption.

The Eastern Approach

Eastern nations, particularly China, have been making significant and controversial strides in blockchain adoption, positioning themselves as formidable competitors on the global stage. In the US, Central Bank Digital Currencies (CBDCs) have been a controversial topic with some politicians such as Tom Emmer, Florida Governor Ron DeSantis, Robert F. Kennedy Jr., Vivek Ramaswamy, Warren Davidson, and others vehemently opposing CBDCs, and even going as far as banning them.

China was the first nation to implement a CBDC strategy on a grand scale with the issuance of the Digital Yuan. While we won’t get into the fears and worries concerning CBDCs, China’s Communist Party and governmental structure allowed them to be the first major issuer as they did not need to contend with the democratic process followed in the West.

As a part of a broader, concerted strategy that integrates technology with national objectives, looking to rival the likes of Amazon and Microsoft, China has also been building China’s Blockchain Service Network (BSN). It’s an ambitious nationwide project aimed at providing a universal digital infrastructure, which in turn can streamline innovation and the integration of this technology into the mainstream economy. This level of commitment and state-backed support is a clear indicator of the East’s intent and progress in the blockchain domain.

Beyond China, Asian nations like South Korea, Japan, Singapore, and India are becoming key players in the blockchain arena, each with distinct strategies and advancements. South Korea is investing heavily to build a blockchain-driven smart city, while Japan’s balanced regulations foster a thriving environment for cryptocurrency and blockchain startups. Singapore is leveraging its financial hub status to lead in FinTech and supply chain blockchain applications. India is focusing on blockchain to enhance governance and empower various sectors through its “IndiaChain” initiative. These countries’ diverse approaches, from regulatory frameworks to innovative projects, underscore their recognition of blockchain as a critical tool for economic growth and is a strategic move in the global digital economy, making them pivotal players in shaping future global economies.

Eastern strategies also reflect a desire for technological sovereignty and a more significant role in setting global standards for blockchain and digital currencies. By investing in these technologies, Eastern nations are looking to reduce their dependence on Western-dominated financial systems and assert greater control over their economic destinies. Many nations still suffer from failing to capitalize on the initial industrial revolution enjoyed by the West and are now taking a measured approach to ensure they will not miss out on the next industrial revolution encapsulated by blockchain technology.

The Geopolitical Stakes

Impact on Global Power Dynamics

The race to master blockchain technology is not just about who can develop the fastest or most efficient system; it’s about who can wield this power to influence and direct the global economic and political order. The nation that leads in blockchain stands to gain influence over international trade, finance, and even governance, as blockchain’s potential extends far beyond cryptocurrencies into areas like supply chain management, digital IDs, secure voting systems, infallible record keeping, tokenizing real-world assets, and more.

Implications for National Security

Blockchain technology, with its promise of unalterable records and enhanced transparency, is poised to enhance national security. The ability to securely share intelligence, protect critical infrastructure, and ensure the integrity of sensitive data is crucial. However, if adversaries lead in this technology, they could gain significant advantages in intelligence operations and cyber warfare, making blockchain proficiency a critical component of national security strategy.

Influence on Technological Leadership

Dominance in blockchain technology represents a leadership role in defining the future of technology. The leading nations will set standards, influence global regulation, and drive innovation across multiple sectors. This technological leadership extends to attracting the brightest minds and biggest investments, further cementing a nation’s status as a global innovator.

Market Dominance and Financial Technologies

With implications for everything from banking and investments to insurance and real estate, the leaders of the blockchain arms race will shape how these industries evolve, potentially controlling new markets and setting the pace for global financial transactions. This dominance also carries the power to influence global currencies, potentially challenging the traditional dominance of the dollar and other major currencies.

Economic and Trade Implications

From boosting domestic industries to setting terms for international trade, blockchain technology can streamline trade processes, reduce fraud, and open new markets. It also has the potential to disrupt traditional industries and labour markets with the potential to significantly enhance a nation’s GDP and economic strength, similar to the period of growth experienced following the widespread adoption of the internet.

In Closing: Strategies for America to Lead in the Blockchain Arms Race

As the world stands on the precipice of a technological revolution, America’s path to leadership is paved with challenges and opportunities. American leaders will need to agree on strategic foresight, innovative policies, and global partnerships. In this intricate dance of power, technology, and policy, America must craft a comprehensive strategy that embraces innovation, fosters collaboration, and sets a visionary regulatory framework. Here’s how America can position itself at the forefront of this transformative era.

Fostering Innovation: Encouraging Homegrown Blockchain Solutions

To lead in the blockchain domain, America must nurture its spirit of competitiveness and its desire to innovate as it did during the days of the Industrial Revolution, the post-war era, space exploration, and the technology boom. The United States cannot afford to remain complacent and rest on its laurels of previous accomplishments.

This involves investing in research and development, providing incentives for startups, and creating educational programs to cultivate a skilled workforce. By empowering entrepreneurs and innovators, America can ensure a steady pipeline of groundbreaking blockchain technologies that could redefine industries and economic practices.

Policy Recommendations: Government’s Role in Blockchain Leadership

Innovation must exist within a framework that encourages growth while safeguarding integrity and security. The U.S. government has a critical role to play in crafting clear, forward-thinking policies that balance regulation with innovation and adaptation. This includes providing clear guidelines on the use of blockchain, addressing concerns related to privacy and security, and establishing standards that promote fair competition. By leading with a regulatory approach that is both flexible and robust, America can set the global standard for blockchain adoption, attracting investment and talent from around the world.

Collaborations and Alliances: Building a Global Blockchain Network

In the globalized world of technology, no nation can afford to operate in isolation, especially in a field as interconnected as blockchain. America must seek to build and strengthen collaborations and alliances with other nations, industries, and international organizations. These partnerships are vital for sharing knowledge, aligning standards, and fostering a global ecosystem where blockchain can flourish. By leading international dialogues and collaborations, America can ensure that blockchain technology is developed in a way that benefits everyone, fostering global economic growth and stability.

In conclusion, for America to lead the Blockchain Arms Race, it must adopt a multifaceted strategy that fosters homegrown innovation, sets visionary policies, and builds a network of global alliances. These strategies must be implemented in a coordinated effort that aligns the government, private sector, and international partners.

Furthermore, politicians who seek to stifle and undermine this technology should seek to understand the stakes and benefits of adoption. While there are risks, embracing technology with a clear vision and a robust strategy is always better than the alternative where one chooses to take a back seat while other nations, both ally and adversary, benefit from adoption. Ignoring technology and attempting to extinguish it only moves innovation and benefits off-shore, damaging your economy and your citizens.

America has the capability to not only lead the blockchain race but also pave the way for a future where technology serves as a foundation for economic prosperity and global cooperation. It must not only innovate but also adopt a unified regulatory approach. The lessons from Europe and the UK are clear: leadership in blockchain doesn’t just come from technological prowess; it comes from the ability to craft a vision, regulate wisely, and foster an ecosystem where innovation can thrive.