Neither the Chinese nor the U.S. governments have revealed what legal instruments are used to control cryptocurrency activities. Because of the enormous financial interest, some of the mainstream financial companies are also openly supporting the use of cryptocurrency for international remittances. At the same time, there are reports that Chinese police are raiding cryptocurrency exchanges, arresting traders and confiscating bitcoins. China’s high-level economic advisors have proposed an outright ban on bitcoin. In the U.S., SEC chairman Jay Clayton has expressed the hope that cryptocurrencies can “both help and hurt consumers.”
So, who will be left on the sidelines? Can emerging-market countries maintain their position as engines of global trade, or will trade friction erode their relative advantages? In a world dominated by interdependence and multipolarity, how can they fend off trade war?
This question was addressed last month in the Presidential Address to the National People’s Congress of the People’s Republic of China. In it, the Chinese Premier Xi Jinping offered a classic “rugged individualism” response, in the style of former U.S. President Theodore Roosevelt. One of his speakers asked: “Why not seize this opportunity, open up a new chapter in economic globalization, and create a broad-based, inclusive and balanced economic community?” Xi replied, “As we seek to realize a fair and just international economic order and more inclusive global economic governance, the role of trade rules and the role of market mechanisms will have to change. Power dynamics have come to be vastly different; the balance of power has tilted in favor of some countries.”
In response to rising nationalist sentiments in Europe, other leading governments have also come up with measures to contain cryptocurrency activities. Last month, for example, the British government announced a set of measures to limit access to offshore channels for trading cryptocurrencies. Singapore has introduced legislation to ban anonymous trading, in addition to confiscating cryptocurrencies. South Korea has banned all initial coin offerings, and is also considering a complete ban on cryptocurrency trading.
Economic fragmentation and the resulting power shift within the international system are dangerous phenomena. But they can also be used as a force for progress. They are opportunities for countries to rethink the governance of their economic and social systems, so that they can draw on the strengths of each other, and cooperate in pursuit of a common goal.