China's State Administration of Foreign Exchange (SAFE) has expanded its pilot cross-border financing blockchain platform to cover 19 provinces and cities, up from nine, a move that experts said will help China to leverage blockchain technology to provide better cross-border financial services with higher transaction security and lower costs.
Launched by SAFE in March, the platform currently has the highest level and most extensive scale in the country. It provides accounts receivable financing services for exports and information verification of companies doing cross-border business. It processed 6,370 transactions as of the end of October, including issuing $6.8 billion worth of loans. Its client list has reached 1,262 companies, 70 percent of which are small and medium-sized enterprises, according to a report by the Shanghai Securities News on Monday.
Cao Yin, an analyst in the blockchain sector, told the Global Times on Monday that the application of blockchain is a "milestone" in the cross-border financing and export trade, as it replaces human labor in traditional financial institutions with a cryptographically secure and tamper-proof system.
"The traditional financial processes, which require a lot of human labor to carry out information verification and authorization, leave a lot of room for financial fraud," Cao said.
"But as the blockchain system promises a decentralized and encrypted track of each capital flow, it leaves potentially little to no space for human mediation," he added.
Apart from offering a new mechanism of trust that's an alternative to traditional financial institutions, the blockchain platform is significantly improving financing conditions for Chinese exporters by reducing processing time and providing real-time supervision, Cao noted.
The processing time for transactions has been reduced to 15 minutes from one to two days. The increase in the efficiency of transaction processing was powered by technologies provided by a blockchain-registry-open-platform from the ZhongChao Blockchain Technology Research Institute based in Hangzhou, capital of East China's Zhejiang Province.
Since its launch in March, the platform has been received with enthusiasm in the market. As of late October, apart from local bureaus of SAFE in the 19 provinces and cities, all branches of 20 commercial banks in those places have been allowed to operate on the trial platform, according to Shanghai Securities News.
The state-level platform is set to be one of the two most influential blockchain projects in China's financial sector alongside the Greater Bay Area trade finance blockchain platform that was launched by the country's central bank.