It became increasingly evident during 2018 that Beijing wants its people to have absolutely nothing to do with digital currencies. However, that does not mean the People’s Republic has shunned the underlying blockchain technology. In fact, quite the opposite is happening in China.
As reported in Asia Times on Friday, the China Banking Association (CBA) has now started to roll out the long-awaited “China Trade and Finance Interbank Trading Blockchain Platform.” It has been designed to standardize and digitize interbank transaction information for trade and financial products and, according to the CBA, it also serves in “laying an important foundation for building a new trade finance ecosystem and improving the efficiency of financial services.”
The project is entirely state-controlled, has nothing to do with crypto assets or virtual currencies, and can be viewed as a kind of evolution of the banking system in that it improves transaction methods, efficiency, and works to better ensure security. Distributed ledger, or blockchain, technology is fully encrypted and tamper-proof, which ensures immutability for banking transactions.
According to the CBA, 10 banks have tested the system and have achieved their objectives successfully. Those banks are the Industrial and Commercial Bank of China (ICBC), Agricultural Bank of China, China Construction Bank, Bank of Communications, China Merchants Bank (CMB), China Everbright Bank, Shanghai Pudong Development Bank, China Postal Savings Bank, Ping An Bank, and HSBC. Two pilots for issuing letters of credit and asset-backed securities were completed by ICBC and CMB.
HSBC China vice president Fang Xiao told local media the setting up of the interbank platform was “an extraordinary, opening up of barriers between different banks and realizing the interflow of information.” The use of blockchain technology to promote trade finance reform, Fang said, had become a “global trend” and HSBC Group’s overseas blockchain trade pilots show that blockchain can be used “to improve the efficiency, safety and scale of trade.”
Chinese fintech firms such as Beijing-based startup PeerSafe are providing technical support for the venture. The CBA said that it would include more small and medium-sized banks in addition to customs and tax agencies in the future.
Other similar initiatives such as the Bay Area Trade Finance Blockchain Platform have already been deployed in Shenzhen by the People’s Bank of China. Hong Kong also announced the launch of a blockchain trade and finance platform in November last year.
Cryptocurrencies aside, blockchain is still big business in China and across Asia, where it is being increasingly deployed to upgrade dilapidated banking systems.