Report: China’s Banks are Turning to Blockchain Technology

By CryptoCoins news

As the Chinese government is turning toward researching and exploring possible applications of blockchain technology, the country’s big banks are increasingly hiring experts and developers to keep up with digitization and a technology-driven landscape.

Having included blockchain development in its latest 5-year plan, the Chinese government’s efforts to embrace FinTech also sees the country’s central bank, the People’s Bank of China (PBOC), explore and research the possibility of introducing its own digital currency.

The agenda is contrary to the usual notion of central banks being late to embrace change, particularly when it comes to core banking processes. Now, it’s the country’s biggest and wealthiest banks that are playing catch up as much of the world’s financial services industry turns toward FinTech and, particularly, blockchain technology.

A report by Reuters has revealed that banks are looking to use blockchain to ‘leapfrog a generation of technology’ citing bankers and blockchain experts.

The Chinese banking system is still heavily reliant on paper and dated communication like faxes, despite housing four of the world’s five largest banks by capital.

In quotes reported by the publication, Brian Behlendorf, director of the open-source Hyperledger blockchain project stated:

China is really interested in blockchain. They’re looking at this as a leapfrog technology. Can you take a very backward, very paper based market, and reinvent that using blockchain?

Banks and recruiters are tapping up Chinese universities and executives from startups with 50% pay rises, the report revealed, with salaries reaching up to 1.2 million yuan (approx. $175,000).

According to one senior manager at an executive search firm in Shanghai, up to ten banks are looking to hire 30 blockchain professionals, as the leap toward paperless, tamper-proof, auditable and secure transactions via blockchain technology gains pace.

Curbing Fraud

A major reason behind the push for blockchain adoption comes widespread cases of fraud in the finance industry. According to Kroll, a business intelligence firm, a staggering 86% of companies surveyed in China reported fraud in 2016. Blockchain’s core property of recording all edits and changes has regulators seeing the technology as a potential solution to curbing fraud.

No regulator bigger than the PBOC, which has spent “significant resources” researching the technology, according to its governor Zhou XIaochuan. Speaking to media last year, the central bank’s chief noted a number of possible applications with blockchain technology, including the likelihood of using it as the core technology toward a digital currency.

Playing Catch-up?

Reuters cites experts as stating that Chinese banks are lagging Western rivals by up to a year when it comes to blockchain adoption. According to R3 director Tim Swanson, China is “still going through the hype cycle” of blockchain adoption before actual implementation comes around.

China’s second largest insurer, the Ping An Group became the first Chinese member of the global blockchain consortium led by R3 in mid-2016, nearly 8 months after it was initially founded. The China Merchants Bank (CMB) followedbefore another notable membership was gained by the China Foreign Exchange Trade System, the country’s interbank market trading platform. R3 is among the most prominent efforts by the financial industry toward blockchain research and implementation.

If blockchain technology is to be adopted globally, standardization of the innovation is fundamental to the cause and it is imperative that the world’s biggest financial institutions, from China, join the global effort.

Accelerating Blockchain Development

Despite the R3 director’s claims, China is quickly laying the foundations toward becoming a Fintech hub while fast-tracking blockchain development. The increasing trend of blockchain specialists aside, a number of Chinese participants are veering toward the open-source Hyperledger blockchain effort over R3’s private blockchain development.

For instance, over 25% of Hyperledger’s members are from mainland China, enough to persuade the open-source consortium led by the Linux Foundation to establish the ‘Technical Working Group China’ (TWG China), a working group that will aim to facilitate interactions between Hyperledger members around the world and contributors from mainland China.

First appeared at CryptoCoins news