The People’s Bank of China (PBoC) said that it has established an e-CNY blockchain-based distributed ledger that commercial banks can access for reconciliation. However, the blockchain faces a couple of challenges including a lack of standards that leaves blockchains unconnected to each other.
Fast facts
- At the International Finance Forum (IFF) held in Guangzhou on Sunday, the deputy-head of the PBOC Digital Currency Research Institute, Di Gang, gave an update on the central bank’s progress on the blockchain. A blockchain-based e-CNY distributed ledger has been built and the e-CNY’s operation institutions — for exchange of digital currencies with the public and most commercial banks — can perform cross-agency reconciliations, maintain the public ledger and back up the ledger.
- Di said that blockchain still faces a number of technical challenges, including that the blockchain interconnectivity is poor and the standards for technical and application are insufficient. Blockchain scalability and performance, privacy protection, information security, auditing and regulating, and inclusiveness to traditional financial systems are all problems that remain to be solved.
- In addition, the central bank is now exploring further tests of the multinational currency bridge (mBridge), a cross-border digital currency trading facility involving mainland China, Hong Kong, Thailand and UAE. Sample tests of trade settlement transactions across 11 industries and 4 jurisdictions have been launched on the platform, and the mBridge is expected to enter the pilot phase in 2022.
- PBoC will also expand its blockchain-based Digital Trade Finance Platform to digitize all the cumbersome paperwork in cross-border trades and engage digital currencies in cross-border trade. The platform has entered the second phase of cooperation with Hong Kong to add connectivity with world trade.