China's banks are racing to adopt blockchain

By Liam Frost

The People’s Bank of China (PBOC) will soon test its blockchain-based digital currency payments system in the cities of Shenzhen and Suzhou, according to a report Chinese financial news outlet Caijing this Monday.

Seven state-owned companies—four commercial banks and three telecom firms—will help PBOC to conduct the test. The central bank has even initiated a kind of “horse race” between banks to encourage the submission of new implementation strategies, according to an anonymous source who is close to the project.

The pilot program will focus on such areas as education, transportation, medical care and commerce. Some of the banks will reportedly cooperate with telecom companies to develop SIM cards with built-in digital wallets, while others are developing their own wallet apps.

The pilot program will be initiated in two stages in Shenzhen, where PBOC’s digital currency will be promoted in 2020 after a testing period at the end of this year.

The city of Suzhou could also become a testing ground for the new currency, especially in light of recent reports stating that a PBOC-backed fintech company—presumably responsible for the research and development of the bank’s digital payments system—was hiring blockchain and encryption experts in the area.

Bank of China's blockchain-based bonds

Also on Monday, the Bank of China, one of the four largest commercial banks in the country, has announced the issuance of 20 billion yuan (around $2.8 billion) in blockchain-based bonds to small and medium enterprises.

The bank used its own blockchain system and claims that this is the first bond transaction executed in the country using this technology. The issuance has a 3.5% annual interest rate of a bond.

As Decrypt reported previously, China’s adoption of distributed networks was kicked into high gear by president Xi Jinping’s endorsement of blockchain as an underpinning technology.

Since then, the country has seen an abundance of new initiatives, positive sentiment and surges across cryptocurrencies and blockchain-related stocks.

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