China To Utilize The Blockchain For FX Transfers

Blockchain, News | April 26, 2019 By:

The People’s Republic of China, which was rumoured to have soured its relation to the Blockchain, by contemplating a complete prohibition of cryptocurrency mining, has just made a decision which probably surprised everybody in both the Blockchain and the FX industry.

According to CNStock, SAFE (State Administration of Foreign Exchange), the local regulator of the financial markets has created a Blockchain platform which will be implemented in FX companies’ operations for sending funds abroad. The SAFE collaborated with Hangzhou Blockchain Technology Research Institute in order to develop a secure platform for where the sender’s and the receivers’ identity will only be accessible by the parties involved. Meaning the firms involved and SAFE themselves.

China finally improving the transfer system

The transfer system for China, in terms of international transactions, especially in the FX industry are lacklustre, to say the least. In fact, it is still manual and paper-based, even in the wake of millions of transactions taking place every single day. The Blockchain platform is believed to speed up this process as well as provide more privacy to the users.

FX Companies eager to accommodate Chinese customers

Many foreign FX companies are happy to accommodate Chinese customers, and in fact, most of these customers would use cryptocurrency as a means of investment in the first place. The slow processing was inconvenient for both the service provider as well as the trader, therefore some alternative had to be found.

It may be surprising to find how reliant some foreign FX companies are on Chinese investors, as they’re the most likely to invest vast amounts of funds. In fact, according to this UproFX review, most of the companies situated Eastern Europe or outside the EU borders are able to cater to Chinese customers, through Blockchain and other transaction methods, such as Alipay or PayPal. Therefore, the addition of a government controlled platform is sure to ease communication.

Unfortunately, however, most FX companies may fall victim to the Chinese government’s rather picky nature when it comes to foreign partners, therefore not everyone may have access to the new Blockchain platform.

It is not known whether the transactions will be made in cryptocurrency or just fiat, but in order to optimize it as much as possible, some type of digital coin will have to be utilized.

A pilot version on its way

The SAFE is very satisfied with the new implementation and will be launching a pilot version in China’s three largest trading provinces Fujian, Jiangsu and Zhejiang as well as two cities Chongqing and Shanghai.

The pilot will last for about 6 months, which will then be followed up by a nationwide adoption by multiple local banks.