Chinese Report: Blockchain Has Not Revolutionized the Production Relations in the Financial Industry
China Academy of Information and Communications Technology(CAICT), a scientific research institute directly under the Ministry of Industry and Information Technology, released the Financial Blockchain Research Report on Tuesday, stating that blockchain adoption in the financial sector is still in the early stage and the emerging technology has not revolutionized the production relations in the financial industry
The Report summarizes 8 key findings of the blockchain adoptions in the finance sector:
First, blockchain will play a positive role in the financial system. Blockchain will affect currency circulation and financial instruments directly, bringing innovative changes to the financial market and its operation. The technology will increase its operational efficiency and expand the direct financial market. Meanwhile, it will decentralize functions of financial intermediaries and reduce the size of indirect financial market.
Second, blockchain will have a profound impact on issuing a central bank digital currency(CBDC) and on establishing CBDC’s circulation mechanism. As cryptocurrencies are unable to function as fiat money, blockchain can serve as the underlying technology for the state-backed digital currency which will become part of a credible monetary system.
Third, blockchain has an edge in cross-border payment and large transactions. Blockchain technologies will increase efficiency, reduce cost and enhance liquidity in the cross-border payment sector.And for the large payment system, blockchain solutions will bring potential benefits in terms of efficiency, transparency, stability and flexibility.
Fourth, supply chain finance is one of the suitable application scenarios for blockchain. Blockchain enables to digitize various kinds of assets, including receivables, bills, warehouse receipts,etc., reducing risks such as promissory note fraud, repeated mortgage and alleviating information asymmetry. Smart contacts are able to ensure the supply chain finance going smoothly.
Fifth, blockchain is still in the concept stage in the field of stock trading. Blockchain applications in the securities sector focus on electronicization of privately issued securities and issuing and trading of public offering securities, most of which are still in the concept stage.
Sixth, blockchain adoption in the insurance area highlights the technology’s features of openness and transparency. Blockchain’s smart contract can optimize business process for insurance company and the technology potentially provides a decentralized trust model to promote the transparency of internal and external regulation of insurance platforms.
Seventh, blockchain helps to build a credit data sharing and trading platform.Set up a blockchain consortium to build credit data sharing and trading platform in order to minimize counterparty risk and reduce costs.
Last but not the least, blockchain-based financial applications face multiple challenges, including regulatory uncertainties. Blockchain applications in the financial sector remain at an early exploration stage. Blockchain still faces many challenges in business, technology and risk management before it is widely adopted by the financial sector. And governments are actively adjusting regulatory strategies to put forward a regulatory approach that suits its national conditions.