The State Administration of Foreign Exchange (SAFE), the agency that regulates and manages foreign exchange (forex) reserves in China, has developed a blockchain system which aims to tackle cross-border finance inefficiencies, according to a report from local news outlet CNStock this Wednesday.
Specifically, China’s SAFE collaborated with the Hangzhou Blockchain Technology Research Institute to build the open blockchain platform. As highlighted by the report, the platform uses multi-signature technology to ensure the content of transactions are kept private, and details are only available for the firms involved in the deal as well as regulators.
This type of system would be a big step for China, as the country’s import and export financing system uses a manual and paper-based operation. Because this industry is very complex, the system is inefficient, and errors are commonplace.
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With the current system in China, the two biggest issues include authenticating the identity of the trade, as well as determining whether to repeat financing, the news outlet said. However, by using a blockchain system, this information would be able to be shared transparently and in real-time.
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Not only will it help businesses, as their transactions could be processed quicker with fewer mistakes and therefore, fewer costs, the blockchain platform could also help financial regulators better police the industry, as it will have access to more reliable information and in a quicker timeframe.
Now that the initial development is complete, SAFE will now pilot the blockchain platform. This will be done in three of the country’s largest trading provinces Jiangsu, Zhejiang and Fujian – and two cities, Shanghai and Chongqing, the news outlet said.
Following the pilot, which is expected to run for six months, the project is expected to be adopted nationwide. Many banks are said to be involved in the project.