In a recent Political Bureau of the Central Committee meeting, President Xi spoke highly of blockchain, describing the technology as an “important breakthrough”. He further urged China to “seize the opportunity” offered by blockchain and accelerate its development.
For a country that has effectively banned bitcoin and other cryptocurrencies from the mainstream media, the comments made by President Xi came as a surprise. His comments, however, reinforces the Chinese government’s commitment to supporting the underlying blockchain technology.
Digital Currency Electronic Payment: national digital currency
As reported last week, China is preparing to launch its own state-backed digital currency early next year. Although no specific dates have been given, the plans for the Digital Currency Electronic Payment (DCEP) are well underway. Digital Currency Research Institute (DCRI), the organization tasked with developing and managing the digital currency, started hiring tech experts a few weeks ago to work on those efforts.
China doesn’t like the idea of Facebook Libra and this is one of the main reasons why the country opted to pick up the pace with its digital currency. The goal is to counter the potential effect of Libra on fiat currencies, which Chinese officials have openly said could help to further establish the U.S. dollar’s dominance in the global market.
The digital currency China is developing would not be subjected to restrictions. Holders of the currency would not receive interest payments. Mu Changchun, the head of DCRI, told a forum in Hong Kong that the central bank will first issue the currency to commercial banks and other institutions, who will then resend it to the general public.
In preparation for the launch of the digital currency, China has started removing anti-blockchain sentiments on social media. It is a move some way will add legitimacy to the cryptocurrency industry even as China continues to encourage the development of blockchain across the country.
China’s public blockchain initiatives
China currently runs many public blockchain initiatives spread across various industries. Just recently, China launched a nationwide blockchain service network (BSN) that would allow SMEs, individuals, and students to develop their businesses with ease. BSN is seen as a low-cost and more accessible alternative to private blockchain networks like Alibaba Cloud and Baidu’s Blockchain Engine (BBE).
Last month, the Chinese government revealed plans to use blockchain to enhance data integrity and transparency in Hangzhou. The cross-border trade platform is majorly designed for customs clearance. However, it can also be used to store data about exchanges, taxation, logistics, and payments.
Apart from the customs clearance system, China is also building a company registration blockchain platform to enhance business efficiency. And in July 2019, China revealed it was building a “blockchain-powered smart city” called Wanxiang City. According to reports, every facet of Wanxiang City like transportation and waste management will be integrated using blockchain and emerging technologies.
China’s blockchain industry developments
In spite of China’s crackdown on cryptocurrencies, this hasn’t prevented the blockchain industry from expanding and growing. Giant corporations such as Alibaba and Tencent have entered the sector with huge investments and growth prospects. This is primarily due to the potential uses of the innovative technology.
State-owned banks Construction Bank and PBOC, meanwhile, are also piloting various blockchain solutions. Meanwhile, China Merchants Bank is also championing the technology. The Merchants Bank in collaboration with blockchain network Nervos, launched its very own decentralized finance (DeFi) platform earlier this month. DeFi is decentralized applications that provide financial services such as lending and payment solutions.
Alibaba, the Chinese e-commerce giant, has experimented with blockchain in a wide variety of areas. This includes food tracking, healthcare transactions, and cross-border trade. Alibaba also boasts the largest number of blockchain patents to be issued to a company anywhere in the world. The company had 262 patents as of May 2019.
But perhaps the biggest blockchain initiative that Alibaba has undertaken is that of advancing Alipay’s technology through its subsidiary Ant-Financial. So far, the company has boosted the functionality of Alipay, integrating it with blockchain technology to enhance customer experiences.