The State Administration of Foreign Exchange in China is trialing a trade finance platform powered by blockchain, in the latest move from a centralized agency towards embracing the technology, local media outlet CNStock reported.
The body, which regulated China’s foreign exchange reserves, is developing a system that would reduce the scope for inefficiencies in international trade finance, according to the news outlet.
The organization is working with the Hangzhou Blockchain Technology Research Institute to develop the project as an open blockchain platform. According to sources close to the development, the platform will use multi-signature technology to keep transaction data obscured, other than to specific parties and regulators, including tax authorities, customs and industry-specific regulators.
At the moment, the processes involved in import and export financing in China are largely paper based, which leads to frequent errors and high operational risks in what is already a complex industry. This adds to the administration costs, and ultimately feeds through into greater financing costs.
The switch to a blockchain system would allow the necessary documentation to be shared instantly in a real-time environment, while reducing the scope for error and providing a clearer audit trail throughout the trade financing chain.
The platform will focus primarily on export receivables, funds owed to companies from foreign buyers after export. This will enable firms exporting overseas to provide more accurate, real-time information about their receivables, which opens up a variety of funding solutions that might not be as readily accessible through paper based systems.
The platform will also look automatically verify parties, as well as calculating final bills for customs declarations, eliminate further scope for error and fraud and reducing the risks of double financing.
Initial development work on the project has already been completed, and the State Administration of Foreign Exchange is now preparing to begin work on a six-month trial of the technology.
Should it prove successful, there are plans to roll out the platform on a national basis, with a number of national banks reported to be interested in working with the platform in addition to strong demand from exporters.
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