How China is Speeding Past the West in Blockchain

In October, China’s President Xi Jingping announced China would “seize the opportunity” afforded by blockchain to, well, pretty much build an innovation economy. His announcement followed that of the People’s Bank of China, revealing its work on a sovereign digital yuan, a state-controlled cryptocurrency that would engage many users—say, the 1.4 billion people in China, for starters. 

China could expand its digital yuan to the 130+ countries in its Belt and Road Initiative, starting where it has built ports and railways or loaned member governments considerable sums to build transport infrastructure. The upshot is that that China could replace the US dollar as the currency of record in global trade. 

Traveling in China, I have witnessed its massive ecosystems—tens of thousands of developers, entrepreneurs, corporations like Alibaba, Baidu, Tencent, and Xiaomi, and governments at all levels investing billions of dollars annually into blockchain initiatives. Its digital yuan was piloted in the city of Shenzhen and expanded to neighboring Hong Kong.Its “single window” blockchain for international tradewas piloted in the port of Shanghai with five of China’s major banks. I could go on.

Meanwhile in Canada and the United States, progress is glacial. China’s explosive announcements should be our wake-up call. 

The previous Internet (of information) emerged from Silicon Valley and continues to generate more tech jobs than anywhere else in North America. The jury is out as to where the Internet of value—based on blockchain technologies—will be centered. Other countries have realized that blockchain will bolster the global competitiveness of all their industries, and so the race is on to claim global leadership and even dominance. 

China's announcement has catapulted blockchain to the forefront of the global conversation about money, finance and the balance of power in this 2nd digital age. The upcoming book Financial Services Revolution captures this and is required reading for business leaders and everyone who cares about the future of our world."

As a first step, every country must understand where it is in this race. As the saying goes, we can’t manage what we’re not measuring. 

Canada at least now has a baseline. In partnership with the Chamber of Digital Commerce Canada, the Blockchain Research Institute developed the first-ever comprehensive national census measuring the size, scope, and scale of Canada’s blockchain ecosystem. We just published the results in a report, which visualizes the blockchain industry's impact on Canadian prosperity. 

One striking finding was how lucrative a career in blockchain technology could be for Canadians. We found that the average annual blockchain salary in Canada is more than $98,000, nearly double the average Canadian salary, putting it on par with senior government officials, engineers, and professors. 

“Canada’s existing innovation ecosystem offers best-in-class talent and pro-growth policies that can be leveraged to establish a leading global blockchain hub here at home. It is clear that Canada’s blockchain ecosystem offers tremendous opportunity to those interested in a career in this field,” said Tanya Woods, managing director of the Chamber of Digital Commerce Canada. Some of the report's key findings include:

• As of August 2019, venture capital and private investments in blockchain start-ups have topped US$10 billion over the past five years globally. Half of these investments were made in the United States and Japan, with Canadian start-ups receiving US$220 million, making Canada the eighth highest target of investment globally. Total global market capitalization of blockchain platforms is currently around US$200 billion. 
• The report breaks down Canada’s blockchain ecosystem by region, sectors, and company size and details the types of innovation taking place across Canada. Ontario is identified as the province with the most blockchain innovators, as a hub of blockchain-based innovation and products; Quebec, as a hub of infrastructure services and applications; British Columbia, as a hub for decentralized applications as well as identity solutions; and Alberta, for blockchain innovations that support natural resource and agriculture supply chains.
• Spending by blockchain entrepreneurs is significant and growing fast. One quarter of the Canadian entrepreneurs surveyed said that they have spent in excess of $1 million each over the last five years on blockchain innovation. There are currently more than 400 companies in Canada identified as actively focused on blockchain innovation.

However, all is not ideal. Census participants identified what they need from our government in order to thrive. Foremost was the regulatory environment in Canada, which they said inhibits start-up innovation and tech entrepreneurship. There are multiple regulatory bodies, sometimes with conflicting rules, which creates regulatory uncertainty. Overall, regulators have not achieved the right balance between protecting shareholders and attracting or retaining innovators. 

Second was the challenge of getting funding. This problem links in part to the first problem: blockchain crowdfunding (called initial coin offerings or token generation events) is difficult to do in Canada. In fact, the Canadian founders of Ethereum, the second most valuable blockchain today after Bitcoin, decided to create a legal and organizational structure in Switzerland and conduct their crowdfunding campaign there. Entrepreneurs are having difficulty getting basic banking and auditing services, too, as banks and the big four audit companies have been reluctant to work with companies because of perceived illegal activity in this space. 

Third was the challenge of finding good talent. While Canadian educational institutions, governments, and the private sector are investing strongly in artificial intelligence and machine learning, they are lagging with investments in blockchain education. The upshot is that numerous entrepreneurs have left Canada, and the country has a new brain drain and a new company drain.

As one respondent said, “Canada gets the importance of AI. We don’t get blockchain.” The goal of this report was not simply to raise awareness of Canada’s blockchain ecosystem opportunity but to create a nationwide sense of urgency around the Canadian roadblocks in the way of innovators.

Canada has many strengths, including world-class education and immigration systems, stable financial markets, thought leadership, and traditions of stability and consumer protection. These strengths should contribute to, rather than be at odds with, innovation and entrepreneurship. If policymakers, regulators, and enterprise leaders can rise to this challenge, we have the opportunity to build the Silicon Valley of blockchain right here in Canada. 

We hope this report acts as a wake-up call. It’s aimed at leaders in both public and private sectors and designed to prioritize the implementation challenges and to initiate high-level conversations.

In the race to blockchain technology leadership, Canada was among the first out of the gate. With a few small changes, we could forge the next era of the digital economy right here.