According to a senior official, the central bank of China has finished work on a blockchain-based system which digitizes checks issued by the domestic businesses.
Di Gang, People’s Bank of China statements.
In an op-ed which was published by a local news source the previous Thursday, Di Gang, the deputy head of the digital currency research lab at the People’s Bank of China, said that the department had completed the infrastructure of a system which issues digital checks based on a blockchain with smart contracts technology.
The work came after a year-long R&D process which kicked off in 2016 when the lab first announced its plans to look to blockchain technology in the hopes of solving the problem of check fraud in the Chinese market, according to Di. Later in January 2017, it has been reported that the agency had successfully tested a prototype in a virtual environment.
The Blockchain platform, with the use of PBFT, can tokenize checks
Based on the explanations of Di, the physical business checks in China function like money orders, except that besides being to claim a payment from a bank, recipients can also exchange them with some other entities.
The large numbers of intermediaries which take on the role of traditional banks to issue checks are an apparent problem, and that brings some additional risk of fraud, he explained. Subsequently, fake checks can circulate among commercial banks, as well as potentially undermine the financial integrity of the country.
Di also said that the blockchain platform of the agency, which was built to enter at consensus by using the practical Byzantine fault tolerance (PBFT), can essentially tokenize checks, while smart contracts can control transactions.
Benefits of the system
One of the main benefits of the system, according to Di, is to give regulators a clear overview of the entire life cycle of a digital check, no matter if it is being redeemed for cash or being used as a security to back up other corporate assets.
Di explained that once when the smart contract rules are set in the blockchain, any participant cannot alter the system efficiently. Even for code updates, he said, regulators are going to have full access to the record, which will increase the regulatory efficiency and reduce the cost by removing a manual cross-checking process for transactions.