One Block, One Street?

I’m sure you’ve noticed that China has been quite active lately asserting its case for economic leadership in the world. Or, one should say, re-asserting.

From the time of pre-imperial Rome to the Renaissance — to take the Western perspective — China was the beating heard of global trade (and there weren’t even globes).

The Silk Road of yore

Thanks to the Web’s most notorious black market, though, the People’s Republic can’t very well call their new initiative “Silk Road” so they’re calling it “One Belt, One Road” or OBOR. The object is to promote Chinese business by land and sea, from Australia to Portugal, linking two-thirds of the world’s population and 40% of its economic activity.

That cannot be done without blockchain technology, no matter what Beijing’s official position is. (Hey, it’s officially Communist but has more billionaires than any country besides the United States.)

Watch the hands, not the cards

So ignore the restrictions on crypto-mining. That was never the piece of the pie China wanted in the first place. It’ll always be a race to the bottom for the cheapest energy producers, and that’s a race China can’t win right now. Sure, it makes more renewable energy than any other country on the planet, but it also has by far the largest population. Three-quarters of Chinese electricity is still coal-fired so, by the time it’s cost per kilowatt makes mining profitable, mining might be obsolete.

No, the Chinese are interested in actually moving goods and services, so the primary interest is going to be in blockchain dApps that can streamline payments or supply chains while enhancing data security.

But yeah, they’re going to back off the crypto-asset crackdown.

Gang’s all here

The first sign is that U.S.-educated economist Yi Gang jumped the line and was named governor of the People’s Bank of China. The 60-year-old is not nearly as FUDded out by crypto-assets as his immediate predecessor, Zhou Xiaochuan. (Zhou can be forgiven, though, because a) he championed the “sea turtle” model of having Western market economies train the next generation of Chinese technocrats — like Yi — and b) he spent so much time reforming the PRC’s monetary system he’d naturally be resistant to anything that would supercede his efforts.)

As Helen Partz reported for Cointelegraph:

“In contrast with the negative stance of PBOC’s deputy governor Pan Gongsheng in December 2017, who argued that Bitcoin ‘will die’, Yi stated at the time that Bitcoin is “inspiring”, and that it will remain a subject of public attention in the long term.”

Simultaneously, China’s IT ministry began crafting digital ledger standards, according to Cointelegraph’s Aaron Wood.

But OBOR’s reach extends through an entire hemisphere. China wouldn’t be moving so inexorably toward embracing crypto-assets if it didn’t have willing counterparties.

Asian fusion

The central bank of relatively nearby (Asia is huge!) Thailand is orchestrating a blockchain platform along with some of the nation’s largest banks. The immediate objective, reports Crypto Consulting, is to digitize letters of guarantee. That should speed up time to settle options contracts but, once the infrastructure is in place — Your Humble Correspondent speculates — it can easily be extended to letters of credit, bankers’ acceptances, commercial paper and other money-market instruments.

The old Silk Road passed through modern-day Kazakhstan (pardon the oxymoron). The former-Soviet republic and nuclear-power-for-five-minutes has been making noise about creating a sovereign cryptocurrency since at least October, per CNBC.

You can’t fault the Astana government for not pulling it off. Far more tech-savvy nations — Japan, Estonia — still haven’t gotten there. Only Venezuela has actually backed its own cryptocurrency, and the petro is only marginally less dodgy than the South American nation’s bolivar-denominated fiat.

Not to be confused with … well, actual money

But Kazakhstan recently experienced an embarrassing setback.

The word went forth from Almaty — Kazakhstan’s financial capital — that HalykCoin would be that national cryptocurrency.

But it might just be a fraud. Or might not. Things are confusing in the ‘Stans.

It wouldn’t be backed by the national treasury, but investors could be forgiven for suspecting that it would be underwritten by Halyk Bank which, after a planned merger later this year, would be by far the largest bank in the land. It’s not guaranteed by the treasury, but it’s almost as good as bet. (Moody’s rates Halyk Bank Ba1 and the sovereign debt Baa3.)

But it’s not. The bank has nothing to do with HalykCoin and labels it a “fraud”.

I don’t know a word of Kazakh, but apparently halyk means “people’s”. The bank can’t claim to own the word, and the HalykCoin team denies that it’s trying to insinuate that it’s a project of HalykBank.

But the speculative digital asset’s web site is still up after all these months, bragging that its ICO has been completed. The Current Author shall endeavor to stay on top of this and let you know the moment HalykCoin fades from view. (Yes, that confident.) By the by, HalykCoin further runs the risk of confusion with Halcyon, a flatlining 2014-vintage crypto-asset that never really had a chance.

Still, it’s clear that Kazakhstan wants to play in the blockchain yard, and China’s willingness to support its OBOR clients could prove an irresistible temptation.

Bear necessities

From there, the old Silk Road proceeds to Russia. There are three ways to deal with official corruption:

  1. “Don’t let us catch you. We mean it.” (China)
  2. “Don’t let us catch you.[ Wink]” (United States)
  3. “Pull up a chair.” (Russia)
Translation: “Denominate all bribes in Swiss francs”

It’s hard to imagine a sketchier mob than Team Vova, so you’d think they’d be all about ICOs. But oddly, no. Maxim Rubchenko from analyzed current legislation before the Duma and predicts, “it is already clear that Russian officials are not going to encourage the development of digital finance.” Moscow is also tamping down mining. Still, there is a frothy blockchain community in Russia, and this scribe will be keeping a close eye on how long the government can repress this creative community. (Considering Russian history, 70 years is a safe bet.)

But regardless of the level of blockchain adoption or restriction in any one of the 68 countries in the OBOR zone, China will be able to meet these trading partners where they are today. And then the Dragon will do what it’s always been very good at doing. And that can be described favorably as harmonizing, or disparagingly as hegemonizing.

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