Central Bank Wu Xuchuan: Actively prepare to build a Chinese version of the R3 Alliance to ensure China's position in the application of blockchain technology

Following Zhou Xiaochuan’s statement at the beginning of the year that the People’s Bank of China has deployed forces to study blockchain application technology, another central bank official stressed that the pilot program of blockchain application should be strengthened.

Wu Xuchuan, secretary-general of the Internet Finance Research Center of the Financial Research Institute of the People's Bank of China, said at a forum recently that blockchain technology has been highly valued by many government departments, including the US government, the People's Bank of China, the Reserve Bank of India, the Dutch Central Bank, etc., all of which are closely following the development of blockchain technology or have already conducted research and are actively exploring the comprehensive application of blockchain.

Wu Xuchuan believes that smart contract (SC)/blockchain (BC) technology may have broad application prospects. We should seize the opportunity of blockchain technology development and adopt a "follow-up strategy" to actively prepare for the establishment of an SC/BC alliance that meets the needs of China's financial market and is widely participated by commercial banks and various non-bank financial institutions, namely China's R3 Alliance, to accelerate the formation of China's SC/BC standards. At the same time, we should actively strengthen the pilot of blockchain applications to ensure that China gains its due position in the application of blockchain technology.

However, he also pointed out that blockchain technology is a peer-to-peer, decentralized technology. While it brings us convenience, efficiency and cost reduction, it also brings many problems such as money laundering. Before these problems are solved, blockchain still needs to be done slowly and steadily, and the risks should not be fully exposed. "Only when things are done well can they be widely used."

The blockchain technology behind Bitcoin is a decentralized ledger system that records every transaction of the cryptocurrency in the Bitcoin application. All transactions are shared and verified by a peer-to-peer network of computers. This "distributed ledger" model monitors the transfer of Bitcoin funds.

The banking industry is very optimistic about the application prospects of blockchain or blockchain-related technologies in traditional businesses. At a time when the global economy is in recession and many international banks are forced to lay off employees, banks see the possibility of direct transactions with each other in blockchain technology to significantly reduce costs. Goldman Sachs once said that in addition to Bitcoin, the application of blockchain technology has unlimited imagination in financial services, sharing economy, Internet of Things and even real estate, and blockchain technology will subvert everything.

In February this year, Zhou Xiaochuan, governor of the People's Bank of China, mentioned that blockchain technology is an optional technology and the People's Bank of China has deployed important forces to study and explore the application of blockchain technology.

The Bank of Canada has gone a step further and has begun electronic currency experiments using blockchain technology.

Wall Street News previously mentioned that in mid-June, the Bank of Canada demonstrated the electronic version of the Canadian dollar they are developing - CAD-Coin. The original intention of this innovation, code-named "Jasper", is to help the central bank issue, transfer or dispose of central bank assets through distributed ledger technology. Several major Canadian banks, including the Royal Bank of Canada, TD Bank and Canadian Imperial Bank of Commerce, have participated in the project.

Jasper allows participants to put cash collateral into a special pool, which the central bank then "converts" into CAD-Coin. The central bank can choose to "destroy" the redeemed CAD-Coin. The technology used by CAD-Coin was developed by R3.