Banking News

China’s foreign exchange dept exploring blockchain for cross-border trade

currencies forex

Yesterday, Reuters reported that China’s State Administration of Foreign Exchange (SAFE) is looking at blockchain and artificial intelligence (AI) for cross-border financing and risk analysis. SAFE’s Lu Lei revealed the news at a forum over the weekend, along with plans to further open the nation’s capital markets to foreign investors.

“We need to pay special attention to the rapid development of digital finance and fintech. When we are not entirely certain where a (new) form of business is heading, we must pay attention to risk management,” said Lu, according to Reuters.

China has multiple blockchain trade finance projects in use. For instance, the central bank’s platform has processed over $4.5 billion in trade, and two weeks ago China Construction Bank updated its own system.

Now the nation’s forex regulation body is reportedly researching the technology. Not only that, but it plans to encourage overseas participation. China’s Xinhua published Lu’s comments: “Our stance is to promote higher-standard opening up on the basis of risk prevention and control.”

Blockchain’s immutability and transparency are well suited to tackling fraud, particularly in finance. Combining this with AI could improve risk management and prediction systems.

Lu added that SAFE’s goal is to “maintain basic stability of the forex market and prevent systemic risks incurred by large-scale, unstable cross-border capital movement.” Furthermore, according to Yicai, it will set up pilots modelling international trade and promoting Yuan-denominated derivates.

SAFE previously ran a blockchain pilot for cross-border trade finance, aiming to streamline the process for SMEs. Whether this March project is related to yesterday’s news is unconfirmed.

But Lu’s comments were made as China is bolstering its efforts to release a digital currency and compete with Facebook’s Libra. Not to mention the trade war with the US, which has highlighted the difficulty of international firms getting involved in Chinese industry. Plus, president Xi Jinping made a speech on the importance of blockchain development just a few days ago.