“A journey of a thousand miles begins with a single step:” The well-worn proverb may apply to China’s approach to blockchain. Steps make strides, strides make progress in payments and business — and how firms do business with one another.
It’s no secret that China has been wrestling with cryptocurrencies. It’s been months since the country banned initial coin offerings (ICOs) outright. Last month, regulators sounded an alarm about illegal fundraisers done through cryptos. There’s even been a ban on advertising, discussing or parading them in public, so to speak, via social media.
Last week, the country appeared to block access to 124 offshore crypto exchanges. The state-run media noted that citizenry cannot use the exchanges.
The rails, though, may be what remains useful. By rails we mean blockchain. That seems to be a bifurcation between cryptos and blockchain itself, where Beijing wants to bring some use cases into mainstream adoption and where the road — the aforementioned journey — moves away from cryptos. Writ large, the embrace comes down from on high.
In May, President Xi Jinping stated that blockchain remains a “breakthrough” technology. As CNBC reported, a handbook has also appeared, geared toward educating government officials on blockchain. The newswire noted that total investment in blockchain from China stands at $3.6 billion in the last two years, according to numbers published late last week.
In the latest of blockchain-related projects, Industrial and Commercial Bank of China (ICBC) said — through its chairman — that the bank will train its sights on developing blockchain projects. This is no minnow among financial firms. The 34-year-old bank is the biggest one in the country, with reach toward more than 500 million individual customers. The company is looking to develop blockchain amid a push toward “smart banking,” which can help secure financial information as it moves between parties.
The sense that blockchain can boost financial services is borne of the April news that the ICBC, among the top four in the country, had filed a patent application with the country’s intellectual property office. The patent is focused on authenticating digital certificates and storing data in a secure manner. Credentials are matched with certificates, and where data is moved onto the blockchain. CoinDesk reported that the bank projects a streamlined operational flow in the midst of making sure that documents are authentic.
This marked the first blockchain project submitted to the country’s patent office.
It should be noted that the blockchain efforts are tied to authentication efforts, and not purely to transactions (i.e., what is being exchanged). Smart contracts, though, ostensibly take out intermediaries and add speed to the process. So, we might surmise that faster exchanges lead to better liquidity, and better liquidity is a desired characteristic of any market.
Beyond the patent and the general idea of blockchain as a conduit for (several) use cases, in terms of business-to-business (B2B) applications, news came on Tuesday (Sept. 4) that People’s Bank of China (PBoC) is in the “testing” phase of trade finance done over blockchain. Cointelegraph reported that the testing phase came earlier than anticipated, and focuses on trade and finance interactions. As noted by the site, quoting Shanghai Securities News, the goal is an “open financial and trade ecosystem based on the Guangdong, Hong Kong and Macau Bay Area.”
The initiative spans several banks, and includes authentication efforts and regulatory oversight. The project, reported Cointelegraph, will “help banks to conduct business authenticity audit[s], reduce business costs, improve business efficiency [and] prevent and control business risks.”