China’s Central Bank Will Start Certifying Blockchain Platforms

The People’s Bank of China – the country’s central bank – has announced the launch of a new process for certifying blockchain platforms.

The new verification system, named the ‘Certification of Fintech Products’,  will certify 11 types of financial technology hardware and software that are widely used for digital payment and blockchain services.

On October 26th, the central bank released the first list which includes fintech products that could be used in both front-end and bank-end development for digital payment services. Currently, the new certification system covers all the products that could be involved in digital payment technologies, including point-of-sale mobile terminals, embedded application software, user front-end software, as well as security carriers and chips.

Notably, a specific fintech item included on the list of 11 products is trusted execution environment (TEE), which is a technology that can assist in the establishment of a “consortium blockchain network and verifying blockchain transactions in financial transactions use cases,” according to the filing.

For reference, giant tech company Microsoft filed for two patents in August 2018 to use similar type of technologies with the goal to improve the security and capacity of its blockchain services offerings.

Furthermore, blockchain platforms will be granted a Certification of Fintech Product (CFP) by the central bank only if their products meet the required checks to pass such as prototype examination and on-site checks. In addition to that, the certificate will be reviewed and renewed every three years.

Respectively, during the three year period, the authorities in charge will conduct random inspections on any step of the production process to ensure compliance. Additionally, institutions will be allowed to stamp the certifications on their logo. However, it is not allowed to use the certification as a means to directly promote products or for advertising itself.

The news follows China’s recent praise of blockchain and cryptocurrencies as a whole, with the President Xi Jinping urging the country to accelerate blockchain adoption, noting that it can and will be a big part of any upcoming technical revolutions.

 “[Blockchain will play] an important role in the next round of technological innovation and industrial transformation. Greater effort should be made to strengthen basic research and boost innovation capacity to help China gain an edge in the theoretical, innovative, and industrial aspects of this emerging field,” stated President Xi Jinping.

The central bank is currently working on developing the country’s own digital currency, which will launch soon. The bank forsees the national digital currency boosting the digital payment industry, touting its own coin’s security features and off-line transaction ability as superior to commercial products offered by China’s Alipay and WeChat Pay.

China Close to Launching Its Own Digital Currency

China’s central bank – People’s Bank of China (PBoC) – has announced that is nearly ready to issue its own sovereign digital currency, according to a senior official.

Mu Changchun, deputy director of the People’s Bank of China’s payments department, has revealed that the bank’s virtual currency was “almost ready” for release. The news was announced by Mu at the China Finance 40 Forum over the weekend.

According to the news report, researchers have successfully developed a prototype that adopts blockchain architecture after five years of research and it is “close to being out.” However, details about the launch have yet to be known.

China’s central bank will reportedly launch its digital token through a two-tier system, with PBoC on an upper level and commercial banks on a secondary level as legitimate issuers.

Mu further explained that issuing a digital currency using a pure blockchain architecture would be difficult to achieve in a country as big as China due to the fact that retailers require high concurrency performance. The bank said it wouldn’t rely on blockchain exclusively, and would instead maintain a more neutral stance on which technology it decides to use.

According to Mu, this will improve accessibility, enhance adoption rates amongst the public as well as promote innovation amongst commercial entities. In addition to that, the digital currency is designed to be suitable for small-scale retail high-frequency business scenarios.

Mu has stressed that the institution’s aim is for the digital currency to replace M0, or cash in circulation, rather than M2, which would generate credit and impact monetary policy. The digital currency would also support the Yuan’s circulation and internationalization, he said.

According to patents registered by the PBoC, consumers as well as businesses would download a mobile wallet and exchange their yuan for the digital money, which they could use to make and receive payments. It is further indicated the wallet would store a digital currency issued by the central bank or any authorized central entity that is encrypted like a cryptocurrency with private keys, offers multi-signature security and is held by users in a decentralized way.

Currently, there are 52 patents filed under the name of the Digital Currency Research Lab of the PBoC, with the latest published in October 9th 2018, having been submitted on March 26th 2018.

Meanwhile, the news comes as global central bankers take a skeptical view on Facebook’s cryptocurrency project – Libra. Earlier in July, former governor of the PBoC Zhou Xiaochuan claimed that Libra poses a threat to payments systems and national currencies and he believed it should come under central bank oversight to prevent potential foreign exchange risks and protect the authority of monetary policy.