The second largest economy is already in the throes of adopting its own form of cryptocurrency and as China looks to become a growing force in the crypto space, it could also translate to innovation in the financial technology, or fintech realm.
“China’s already significant blockchain activity will be supercharged,” wrote Kevin Werbach, a professor of legal studies and business ethics at the Wharton School, University of Pennsylvania, in “Wired.” “Over 500 blockchain projects, from many of China’s most powerful companies, have already registered since last year with China’s Cyberspace Administration. The People’s Bank of China (PBOC) is stepping up efforts to launch a Digital Currency Electronic Payment System (DCEP), which could replace cash with a blockchain-based solution. It would make China the first major economy to adopt a native digital currency. China could then use DCEP to manage funding for its Belt and Road program of overseas infrastructure investments, extending its monetary sphere of influence.”
While China continues to embrace cryptocurrency, it continues to get the cold shoulder in the U.S. For example, regulators are keeping social media giant Facebook’s cryptocurrency project “libra” mired in bureaucratic red tape.
“Zuckerberg and cryptocurrency enthusiasts chastise the US for resisting business innovation that China is embracing,” Werbach added. “They argue that unless cryptocurrency creators have free rein to deploy their systems at mass scale, Chinese alternatives will prevail. This analysis is over-simplistic. Regulators are right to be concerned about the impacts Libra and initial coin offerings may have on monetary policy and global financial stability. Cryptocurrencies can indeed be used for money laundering, terrorist financing, fraud, and other illegal conduct. Giving platforms like Facebook too much power over payment systems could further cement their dominance and erode privacy protections. The real danger is that China recognizes blockchain as a strategic technological innovation, which the US government is ignoring.”
One ETF to consider that takes advantage of China’s advances in financial technology is the TigerShares China-U.S. Internet Titans ETF (NasdaqGM: TTTN). The fund seeks to provide investment results that closely correspond to the performance of the Nasdaq China US Internet Tiger Index.
Normally, the fund will invest at least 80% of its assets, exclusive of any collateral held from securities lending, in the components of the index, depositary receipts representing such components and securities underlying depositary receipts in the index. The index is designed to track the performance of the 10 largest publicly-traded Chinese Internet companies and the 10 largest publicly-traded U.S. Internet companies.