Capital markets News

Chinese stock exchanges progress with blockchain

stock exchange market

There have been two pieces of Chinese blockchain related news for stock exchanges in the last two days. Firstly, China’s main market, the Shanghai Stock Exchange, unveiled a blockchain pilot. And the blockchain custody system for the Beijing Regional Equity Market, the so-called 4th board, was launched. Its blockchain solution is for online stock registration and transfer for unlisted securities, as previously reported.

Shanghai Stock Exchange blockchain

The Shanghai Stock Exchange received the China Securities Regulatory Commission’s (CSRC) approval. And a big part of its role involves integrating with the supervisory systems, which in the case of CSRC, also leverage blockchain, reports Shanghai Securities News. The hope is it will solve the time-consuming business processes, presumably reconciliations, and reduce costs. It will help to improve transparency and there are plans to reform the credit management systems for the capital markets.

In terms of progress, the pilot is reasonably advanced. It has all the data for enterprises, intermediaries and investors on-chain. The current use cases include listings, custody, transactions, capital management and disclosures.

There seems to be a desire to use the system as a template for the back-office management for all 34 regional equity markets and potentially centralize them. From one perspective, that seems like a practical step. One can imagine from a supervisory viewpoint, in future, it will enable regulators to see the full portfolios of investors and whether their net worth tallies with their tax returns.

The Shanghai platform uses the WuTongChain, which is described as one of the first domestically created blockchain protocols. The open-source blockchain was developed by the Tongji Blockchain Research Institute, a joint venture between the Suzhou government and Tongji University. The blockchain has some big-name partners, including BaosteelCOSCO Shipping, and UnionPay, China’s answer to Visa and Mastercard.