China’s central bank is looking forward to issuing blockchain based system that digitizes checks issued by domestic businesses. Di Gang, the deputy head of the digital currency research lab at the People’s Bank of China said the department had completed the pilot testing of the infrastructure of a system that issues digital checks based on a blockchain with smart contracts technology.
The work on this technology comes after a year-long R&D process that began in 2016. According to Di, the agency has successfully tested a prototype in a virtual environment with the expectations of solving the problem of fraudulent checks in the Chinese market as fake checks easily circulate among commercial banks undermining the country’s financial integrity.
The new technology can provide financial services with efficient technical support for disclosure of business processes without the need of third-party intermediaries, information disclosure, and asset circulation records.
The digital bills that work on the blockchain in the form of smart contracts will get automatically enforced, reducing transaction risks and avoiding social costs of judicial relief. The owner of the instrument has the right to exercise and transfer the instrument, and the holder has the right to transfer the instrument or execute the rights specified in the instrument.
“The practice shows that the optimized blockchain technology can effectively support the issuance, acceptance, and discounting of digital bills, and lays a foundation for the innovative development of the bill business.”, Di said.
The agency’s blockchain platform can essentially tokenize checks, while transactions can be controlled via smart contracts. One of the primary benefits of the system is to give regulators a clear overview of the entire life cycle of a digital check, regardless of whether it is being redeemed for cash or being used as a security to back up other corporate assets.