A recent report from a leading Chinese research institute under China’s Ministry of Industry and Information (MIIT) and Tencent Holdings has concluded that blockchain technology will have a “profound impact” on creating a legal digital currency and drastically improve financial services.
Blockchain above all else
Other than blockchain technology itself, China has held a rather strict stance on initial coin offerings (ICOs), cryptocurrencies and exchanges. In late 2017, the People’s Bank of China (PBoC) banned ICOs, deeming them an “illegal fundraising” method, then shortly after in February 2018, banned cryptocurrency trading entirely.
However, China is growing fond of the underpinning technology that powers ICOs and cryptocurrencies. In recent months, there has been a notable rise in blockchain related activity in the country, with rises in blockchain-named companies increasing by 500% and even the PBoC adopting the nascent tech.
The 24 July report that was produced by The Academy of Information and Communications Technology and Tencent Holdings has eight key conclusions, one being that “blockchain will play a positive role in the financial system”.
However, it states that the application of the tech in finance is presently limited to offering new solutions for “the issuance and circulation of asset equity certificates under a new perspective”.
It also adds on the matter, saying that, “Blockchain directly affects currency circulation and financial instruments, and indirectly brings changes in financial market and financial market operations. These two points are two major innovations. At the same time, financial market operation efficiency is improved.”
The study gives nod to the value of blockchain in supply chain finance, which is often cited as a facet of businesses that will benefit most from blockchain.
Fascinatingly, the study raises eyebrows by mentioning a legal digital currency that can operate basic functions such as “a trading medium, pricing unit and value storage”.
Blockchain can be the tech that makes this a possibility. The study writes, “The blockchain pair will have a profound impact on the establishment of the legal digital currency issuance and circulation mechanism.”
In addition to these, it concludes that blockchain will greatly impact payment and settlement, securities trading, insurance and credit reporting.
Investment in the chain
The report is timely as the drive in China for blockchain adoption is at an all-time high. In recent months, governing bodies of Chinese cities have been investing incredible amounts of funding into blockchain startups and academic innovations.
Nanjing recently announced a USD 1.48 billion fund for academic innovations, blockchain startups as well as companies who are seeking to integrate technology into their businesses. In April, Shenzhen received USD 80 million for blockchain startups in the city, and shortly before, Hangzhou was the recipient of a USD 1.6 billion blockchain innovation fund.
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