China gung-ho on blockchain, aims to tackle fraud in market

After reportedly testing a blockchain based digital currency, the People's Bank of China (PBOC) is further looking to reap the benefits of the technology to improve transparency and tackle fraud in its financial sector.

Despite having four banks rank among the world's five largest by capital, the Chinese lenders struggle with outdated technology and still use papers, conventional stamps to verify documents.

This has lead to many loopholes in the country's financial system and has made it vulnerable to fraud.

A recent study by business intelligence firm Kroll said that in China 86 percent of the companies surveyed reported fraud in 2016, above the global average of 82 percent and representing a double-digit (13 percent) increase from 2015.

Respondents in China named regulatory or compliance breaches as the most common type of fraud (41 percent), nearly double the global average. This was followed by vendor, supplier, or procurement fraud, which was 11 percent higher than the global average, the report said.

Blockchain, the technology that empowers bitcoins is a distributed, decentralized ledger that uses layers of encryption to verify and protect transactions across its network.

The use of blockchain has the potential to streamline traditional banking back office procedures and bring more transparency to the work of financial institutions while providing secure transfer of digital assets among customers and businesses.

Banks including Ping An Bank and Bank of China have unveiled blockchain investments and projects, and around ten banks are looking to hire some 30 blockchain professionals, Steven Shen, a senior manager at executive search firm Robert Walters in Shanghai told Reuters.

Recent development

Credit China Fintech Holdings Ltd, a Hong Kong-based industry investment firm announced yesterday that it has entered a USD 30 million agreement with bitcoin- and blockchain-industry giant BitFury to establish of a joint venture focusing on the Chinese market.

Phang Yew Kiat, VC and CEO of Credit China Fintech, said: “Blockchain is a fast emerging technology allowing effective secured value transfer over the internet. Our collaboration with BitFury will further cement our leadership position in the use of Blockchain technologies across our FinTech platforms, taking Credit China Fintech to a new level of competitiveness.”