On July 22, the Senate Banking Committee’s Subcommittee on Economic Policy held a hearing on the role of innovation in the escalating competition between China and the United States.

Today’s hearing comes on the heels of a Department of Justice indictment yesterday against several hackers accused of working for the Chinese government to steal trade secrets from U.S. companies as well as to rumble dissidents in places like Hong Kong. 

CBDC as a zone of competition

J. Christopher Giancarlo, former Chairman of the CFTC and current leader of the DIgital Dollar Project, testified today on the declining infrastructure of the U.S., including in payments. 

The Digital Dollar Project and Giancarlo himself are notable advocates for a U.S. central bank digital currency (CBDC), which they see as critical to maintaining the country’s economic standing. Giancarlo continued some of his points from a hearing before the whole Banking Committee at the end of June. 

Today’s hearing found Giancarlo speaking more extensively about the specific advantages of distributed ledger technology than he and other representatives of the Digital Dollar Project have done thus far. In his opening remarks, he said: 

“The DLT network would operate on an autonomous permissioned network and ensure validity and integrity of all transactions. The verification of transactions would rest on the complete history or lineage of the tokens from original issuance in order to attest tokens are genuine and have not been double spent.”

The innovation economy and balance of power

Lisa Cook, a professor at Michigan State University, noted several critical features of the U.S. innovation economy that give it a competitive advantage. Of U.S. intellectual property protections particularly, Cook said: 

“It is clear that the U.S. patent system is offering something that the Government of China will not or cannot offer its inventors and entrepreneurs: determination of originality (or first to patent) and defense of intellectual property.” 

Commenting on China’s ability to Professor Walter Russell Mead said that: 

“Under the new system of hyper-centralized control that increasingly and sadly characterizes China today, distinctions between state-owned corporations and private business can no longer be taken at face value.” 

China’s progress on CBDCs has provoked many U.S. regulators to pay greater attention to the field amid a broader escalation of tensions between the two nations.