In a recent piece by Anja Manuel and Leo Carter that was published on Business Insider UK, the pair suggested that the USA needs to develop a comprehensive strategy to address blockchain development. The reasons cited varied, but the overall theme was one of protecting national security, and ensuring a competitive stance with other global powers.
From Anja Manuel and Leo Carter,
“One of the Defense Department’s chief concerns regarding new defense systems is that the components are manufactured all over the world, so it is possible that suppliers close to a foreign government could install undetectable backdoors for spying.
Faulty microchips or skulking spyware are real risks in today’s opaque global supply chains. The blockchain’s accurate and detailed ledger could reduce these risks by tracking what each subcontractor supplies and ensuring that each component is traceable.”
The pair brings up a great point that reaches well beyond the development of blockchain. After decades of outsourcing by US companies, the US defense apparatus relies on manufactures in seemingly hostile nations. Blockchain could certainly help to identify possible choke-points in a supply chain, but it can’t do much to help US contractors find domestic sources when none exist.
Global Blockchain Development is Part of a Larger Trend
Innovation is a big part of what keeps an economy competitive. Offshoring the production of vital technology isn’t going to maintain any sort of economic competitiveness in the long-term. Now places like Taiwan, South Korea and even China are leading the world in blockchain innovation and adoption, while the US looks for ways to regulate a space that is evolving rapidly.
The recent announcement by Intercontinental Exchange (ICE) is a good example of what holds the US back in a competitive space that thrives on the ability to adapt quickly. ICE would like to introduce the first futures contract that would be settled in actual bitcoins, but it will probably take at least a year to gain regulatory approval. Their plan to implement a system to bridge the crypto-fiat divide is fraught with similar difficulties.
The piece by Anja Manuel and Leo Carter mentions some jurisdictions where innovation is put into a more prominent position,
“Lichtenstein and Malta are early movers in establishing legal frameworks for blockchain.
In July, Malta passed three laws that established internal governance requirements and certification procedures to better protect both consumers and businesses.
While no one is concerned about Malta and Lichtenstein, it would be unhelpful if China, Russia, or other governments antagonistic to the United States determined the standards in this critical new technology.”
The level of arrogance that some in the US hold for other nations is palpable in a phrase like, “While no one is concerned about Malta and Lichtenstein…”
This should be a wake up call for innovators in the USA, Lichtenstein and Malta are pulling ahead in the race to provide a legal framework for crypto-based transactions, and they could easily become global leaders in the space. This point isn’t lost on some in the UK. MP Eddie Hughes recently called for a national blockchain officer to be established, and the UK Law Commission is looking into how smart-contracts could be used commercially in the UK’s legal system.
Asian Blockchain Development is Exploding
Even though China has basically banned the trade in cryptos, their nation has more blockchain companies than any other country on earth. Some of these are clearly not going to be world leaders, but with the billions of dollars that the Chinese government is ploughing into blockchain development, there are probably going to be some winners in the mix.
Hong Kong is taking blockchain development seriously, and has announced that the Hong Kong Monetary Authority will be working with some of the biggest banks in the world to spearhead a new blockchain platform that will streamline trade finance. The platform their system will work on was built by Chinese company Ping An, and is already being used in mainland China.
To say that US-based blockchain development is lagging would be something of an understatement. Even Australia, which isn’t a country that is known for taking the lead in tech innovation, has already adopted a blockchain-based system for settling trades on its stock exchange. Commonwealth Bank of Australia just used blockchain to track a shipment of almonds from Victoria to Germany, and reported the system worked well.
The USA has already fallen behind the blockchain development curve. Whether or not this will damage the USA in the long term is unknown. If the US continues to try and gain advantage by offshoring production to cheaper economic zones, the risk they will become a client state in the next few decades is high.