logo

09/18/2020

Digital currency will end the reign of the dollar

Digital currency will end the reign of the dollar

Will Washington drive the dollar’s worldwide power to the frontlines in its economic war against China? In other words, will the US use the financial sovereignty it has gained thanks to the dollar as the currency of exchange in the world as a weapon? Will it be able to afford to banish Chinese banks from the SWIFT system under its control? Those who say that this step is expected from Trump are a majority. Experts predict that even if the US administration’s exclusion of China from the international banking system causes temporary damage to the Chinese economy, the process will eventually result in the collapse of the dollar’s global reign.

CHINA’S DIGITAL CURRENCY TRIAL

With its enormous financial power, China is not simply sitting around waiting for Washington to make the first move. Chinese President Xi Jinping mobilized the Chinese state to create the infrastructure for a digital currency on October 24, 2019. (1) The People’s Bank of China, the country’s central bank, was one of the first central banks to launch its own digital currency. The National People’s Congress, assembled in May 2020, passed a new law on decoding and network security. Pilot trials for this currency were launched in April 2020.

Trials first took place in Shenzhen, Suzhou, Chengdu and Xiong’an. Some officials in Suzhou initially started receiving half of their transportation subsidies in the new currency.

The new currency is intended to replace part of China’s existing monetary base, although it may not cover it in its entirety. Digital money needs to become widespread in order to be accepted in the current banking system. As is well known, for China, the second largest economy in the world, its own domestic market is its biggest base of support. At the same time, China predicts that it will be easier for digital money to gain international validity thanks to the alliances it has established in Asia and Africa.

China’s digital currency is not a cryptocurrency like Bitcoin. The unofficial name of the currency is DCEP. In a way, it is the payment unit for e-commerce that has left its mark on the present day.

Private companies such as Meituan-Dianping, the most common food retailer in China, video streaming platform Bilibili, and e-taxi company Didi have also joined the pilot.

China’s crypto-currency: a major threat to dollar hegemony

The Ministry of Commerce of the People’s Republic of China launched a larger pilot on August 14. Digital currency began to be used in the Yangtze River Delta, which includes Guangdong Province and neighboring cities of Hong Kong and Macau, on China’s rich southern coast. (2)

INFRASTRUCTURE AND THE BLOCKCHAIN

In order to replace paper money with digital money, an internationally valid accounting and recording system must be established. Blockchain technology makes it possible to establish this infrastructure.

Blockchain technology is an advanced form of the internet. All kinds of data can be circulated on the Internet whereas valuable data circulates in the Blockchain. Thanks to the distributed recording system, the original form cannot be changed, and remains in the system to ensure transactions.

No other country in the world has set up a more comprehensive Blockchain policy than China and has allocated the necessary resources for the development of this technology.

“We must consider the Blockchain as an important breakthrough for independent innovation of core technologies,” said Xi Jinping at the Central Committee Political Bureau in Beijing on October 24, 2019. President Xi said that Blockchain technology has a wide range of applications in China, from financing businesses to public transport and poverty alleviation. Xi Jinping also emphasized that the technology of the Blockchain will be decisive in the rule of law. (3)

THE PROGRAM OF THE BEIJING GOVERNMENT

On July 16, 2020, the Beijing Local government announced the world’s most ambitious program on the Blockchain.

The Beijing Local Government’s 145-page document sets out the principles and scope of using the Blockchain as a framework to create a digital platform that encompasses the entire state.(4)

Beijing is one of 11 cities where official Blockchain strategies have been tested. There are various exciting initiatives from both the public and private sector in China. The internet court, serving on a Blockchain-based platform, has decided on a transaction worth 1.98 billion yuan in 2020. Web giant Alibaba’s financial company Ant Financial recently launched a cross-border Blockchain-based remittance services for users in Hong Kong and the Philippines. JD.com, China’s second largest e-commerce site, uses the Blockchain technology to combat food fraud: When consumers scan a QR code on packaged food, they can view the food’s production and delivery history.

THE BLOCKCHAIN-BASED SERVICE NETWORK (BSN)

On August 10, with the public-private sector cooperation in China, the Blockchain-Based Service Network (BSN) was launched worldwide. (5)

BSN is another cornerstone of the Chinese government’s strategy to develop Blockchain technology. The BSN aims to be the global Blockchain infrastructure network. A Beijing-based company called Red Date Technology is at the center of this partnership, along with China Mobile (with 950 million subscribers) and China Union Pay (the world’s most important payment and payment provider).

China sees the Blockchain as a strategic technology, alongside artificial intelligence, 5G and the Internet of Things, quantum computing and cloud computing. It is calculated that it will increase economic growth and productivity in the coming years.

Initiatives such as BNS and DCEP are helping to create a market both within the country and abroad for Blockchain-featured products, where Chinese companies will set the standards.

CONCLUSION: IT’S TIME FOR TURKEY TO MAKE A MOVE

Last week, we covered how the Beidou Satellite system developed by China, a secure communication and data transfer infrastructure, was established. China is taking multiple tools of hegemony from the US. With the adoption of the digital currency system, the establishment of a more fair, equitable and sustainable international division of labor will depend on political decisions. The US’s loss of manufacturing power and technological superiority limits the destructiveness of its military power.

Blockchain technology is one of the pillars of the “Fourth Industrial Revolution” together with artificial intelligence. China is taking the lead on both of these fronts.

In Turkey, with our trained human power, we can become a developer, rather than a dependent consumer, of these new technologies. The conditions exist for Turkey to develop an exemplary civilization of the future,(6) but to do so, Turkey must turn toward the light rising from the East.

[1] http://www.xinhuanet.com/2019-10/25/c_1125153665.htm

[2] https://supchina.com/2020/08/14/will-china-succeed-in-blockchain/

[3] http://www.xinhuanet.com/2019-10/25/c_1125153665.htm

[4] https://law.stanford.edu/wp-content/uploads/2020/07/China_Blockchain.pdf

[5] https://global.bsnbase.com/g/main/index

[6] Mustafa Kemal Atatürk’ün 10. Yıl Nutku, Kaynak Yayınları, Atatürk’ün Bütün Eserleri Cilt 26

Adnan Akfırat
Adnan Akfirat is a Representative to China and Member of International Relations Bureau of Patriotic Party of Turkey; Chairman of Turkish-Chinese Business Development and Friendship Association (Turk-Cin Is Der); visitor researcher of Shanghai University Turkish Studies Center and Shihezi University Silk Road Research Center. Mr. Akfirat has been living in Shanghai since 2011.

Leave a Reply

Your email address will not be published. Required fields are marked *

Calendar

January 2021
MTWTFSS
 123
45678910
11121314151617
18192021222324
25262728293031