People’s Bank of China Pilots Trade Finance Blockchain Platform

China's central bank is introducing a blockchain trading platform to assist small and medium enterprises.

The People’s Bank of China is pushing for the integration of blockchain technology in the domestic financial system as it pilot-tests a blockchain trade finance platform, reports 21st Century Business Herald.

The Bay Area Trade Finance Blockchain Platform was officially rolled out on Tuesday in Shenzhen’s financial institutions for trial and testing. The testing phase of the blockchain trade finance platform will run until the desired results are met, the report added.

“After nearly two months of closed development, Ping An Bank, Standard Chartered Bank, and BYD successfully reached the first phase of the Bay Area Trade Finance Blockchain Platform Project. The first phase of the project has been deployed online and entered the trial operation phase,” the report said.

It added the platform is a joint project between the PBoC’s Digital Currency Research Lab and the central bank’s Shenzhen branch. Also involved in the project are the Bank of China, the Bank of Communications, and the China Merchants Bank.

The choice of Bay Area in Southern China provides a strategic purpose for the central bank as the area is in an economic development zone comprised of several major cities in the special administrative regions of Macau and Hong Kong and along the Pearl River.

According to the PBoC, the trade finance platform is designed to provide seamless and efficient interbank transactions. It aims to assist small and medium enterprises (SMEs) gain access to broader financing options, including asset-backed securities.

The platform is believed capable of effectively promoting the formation of a market trust mechanism, better serve the real economy and help banks to conduct business authenticity audits and reduce business costs. It can also improve business efficiency, prevent and control business risks as well as help regulatory authorities to enrich regulatory tools, and effectively strengthen financial supervision. In addition, the project could enhance the information sharing between departments and jointly build a trade finance ecosystem.

Interestingly, despite China’s ban on initial coin offerings (ICOs) and digital currency trading, the Communist Party of China (CPC) recently published an educational book on blockchain technology, titled "Blockchain – a Guide for Leaders."

Ye Hao, president of the CPC’s official mouthpiece the People's Daily, said:

"The biggest significance of blockchain technology at present is its operating mechanism. Through the ingenious combination of technologies, it can achieve the fair distribution of resources, thus ensuring that the community has consistent goals, and members have behavioral norms. This provides us with a new approach to examine problems, and come up with solutions.”