Take Brexit Britain and Trump’s America. Add climate change, instability in the Middle East, cryptocurrencies, and self-driving cars… and you have the world in 2018: hopeful, yet seemingly unpredictable.

We have assembled 11 unlikely events that - if they somehow happened - have the potential to profoundly affect the world as we know it.

To assess the political, economic, financial, and social impacts, IG brought together global economic/political experts to give their perspectives and predictions.

Explore some of the great unknowns facing us all today

cryptocurrency code

What If

China’s government-backed cryptocurrency overtakes bitcoin

While most of the world is freely speculating on bitcoin, China has made an exception. The country banned cryptocurrencies last year and also blocked its citizens’ access to trading platforms. However, the Chinese government is now investing $1.6 billion in blockchain technology – could its own cryptocurrency become bigger than bitcoin?

Category: Economy Region: Global

map of china

Our panel of experts (interviewed March-May 2018):

Thomas Hale

Thomas Hale

Associate Professor of Global Public Policy, University of Oxford

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Dr Thomas Hale is Associate Professor of Global Public Policy and Director for China Engagement at Blavatnik School of Government, University of Oxford. He holds a PhD in Politics from Princeton University, a Masters degree in Global Politics from the London School of Economics and an AB in public policy from Princeton’s Woodrow Wilson School. Hale has published four books, most recently Beyond Gridlock and Between Interests and Law: The Politics of Transnational Commercial Disputes.

Shaun Murison

Shaun Murison

Senior Market Analyst, IG

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Shaun Murison is a senior market analyst (South Africa) for IG and has over a decade of experience in financial markets. He regularly presents CFD trading seminars around the country and is a regular commentator on the financial markets, contributing to media channels such as CNBC Africa and Business Day, and writing daily and weekly market reports. He is a registered person at the JSE as well as a Certified Financial Technician (CFTE).

Stephan Tual

Stephan Tual

Founder, Atlas Neue

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Stephan Tual is the Founder of Atlas Neue, a development and financial services company which creates, funds and supports exciting ventures in the blockchain space. Tual helped raise $18.9 million as former CCO of Ethereum, now valued over $90bn. He is a blockchain expert in smart contracts and their decentralised applications. Stephan is also the founder and COO of slock.it, a project at the intersection of the IoT and blockchain that aims to address security, identity, coordination and privacy over billions of devices.

[ What if this happened? ]

Thomas Hale
Thomas Hale
Were it to happen, and were many Chinese people to invest in the cryptocurrency, the risk of a financial crisis in China would increase. Should a crisis actually emerge, the government would most likely take steps to bail out key companies that would be adversely affected. It has the reserves to do so, but should it tap them, the effect on forex markets could be enormous. It would almost certainly prompt countermeasures from the US Federal Reserve, the European Central Bank and others.
Shaun Murison
Shaun Murison
It is said that the idea has been in research since 2014 and that China has run trials on a prototype currency. The region is fast-tracking the standardisation and regulation of digital currencies for use in the economy. It could set a global trend and we could see other major economies following suit.
Stephan Tual
Stephan Tual
If China launched a government-backed cryptocurrency, the consequences would be no different than if any other country did. It would be a watershed for both the established world of finance and the fledgling blockchain vertical.

[ Likelihood ]

We asked our experts to rate how likely it is that China’s government-backed cryptocurrency will overtake bitcoin.

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[ Impact ]

Panel members also rated the impact they would expect this event to have.

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The Political Impact

Thomas Hale

Thomas Hale

Associate Professor of Global Public Policy, University of Oxford

A widely held Chinese-backed cryptocurrency would have little political effect on its own. Should a major financial crisis emerge, China would face an unprecedented test to its domestic legitimacy. It would likely increase investment in social programmes, and could also be expected to increase nationalistic and military frictions around the South China Sea and other similar territorial disputes. A sharp rise in repression of domestic dissent would also be expected.
Shaun Murison

Shaun Murison

Senior Market Analyst, IG

It would depend on the success or failure of a new digital currency that is regulated.
Stephan Tual

Stephan Tual

Founder, Atlas Neue

It’s also likely we’d see this cryptocurrency to be very limited in functionality, with its mining centralised and a ‘red list’ for censorship implemented as part of the core protocol. No government would risk launching a currency only to lose control over it to the hands of the general population, or worse, another government.

The Economic Impact

Thomas Hale

Thomas Hale

Associate Professor of Global Public Policy, University of Oxford

A widely held Chinese-backed cryptocurrency would have little economic effect on its own. Should a major financial crisis emerge, it could trigger a fundamental change in the Chinese economic model, with a not-unlikely outcome of becoming a Japanese-style zombie economy that treads water but is relatively stable. Cryptocurrencies are not yet used as actual currencies – and it is unclear that they ever will be – so the risks they pose to the economy are similar to other speculative commodities or asset classes. But if a sufficiently large number of Chinese investors did acquire the currency, and then lost their shirts, there would be enormous pressure for the state to bail them out. That could precipitate a broader financial crisis.
Stephan Tual

Stephan Tual

I do not think it would ‘kill off’ established, more innovative projects such as ethereum, but cryptocurrencies such as bitcoin, litecoin and certainly the myriads of worthless ‘alts’ would be in for a tough ride.

The Financial Impact

Thomas Hale

Thomas Hale

Associate Professor of Global Public Policy, University of Oxford

A widely held Chinese-backed crypto would have little effect on its own. Should a major financial crisis emerge, the economic effects could be as large as the 2008-9 crisis.
Shaun Murison

Shaun Murison

Senior Market Analyst, IG

New regulated digital currencies – if successful and integrated correctly, over a long period of time – could challenge the status quo in terms of dollar dominance as a world reserve. This, in turn, could alter the dynamics of international trade, economic sanctions and general foreign relations.
Stephan Tual

Stephan Tual

Founder, Atlas Neue

We’d likely see integration of said cryptocurrency in established software, such as browsers and mobile-phone operating systems, especially from China-based manufacturers and developers. Ironically, it would be the catalyst for mainstream adoption at the cost of functionality, immutability and censorship resistance.

The Social Impact

Thomas Hale

Thomas Hale

Associate Professor of Global Public Policy, University of Oxford

A widely held Chinese-backed crypto would have little social effect on its own. A financial crisis in China would sharpen tensions in the country between the haves and have-nots, a tension which is becoming increasingly acute. Income inequality has risen steadily, and is seen by the Chinese government as a major social issue. The government is investing significantly in rural areas and in nascent social welfare programmes to address this issue. But should a major financial crisis emerge, it would have less capacity to do so, allowing the issue to worsen.
Shaun Murison

Shaun Murison

Senior Market Analyst, IG

It would lead to a more digitised global economy.
Stephan Tual

Stephan Tual

Founder, Atlas Neue

As no government currently backs any given crypto in earnest, it’s likely this cryptocurrency would be seen as the de facto ‘better one’ in the eyes of the general public. It’s also likely that many of the long-timers in the blockchain space would support it and, as we all know, it’s the early adopters that control over 50% of the current crypto monetary base.

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IG is the UK’s No. 1 retail forex provider,1 with a unique range of charts and trading features. Image creditsPlease note, IG worked in cooperation with an external research agency to produce this piece. Analysis does not constitute trading or investment advice. Losses can exceed deposits.1By number of primary relationships with FX traders (Investment Trends UK Leveraged Trading Report released June 2017).

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