The People's Bank of China (PBoC), country’s central bank, has built a blockchain-based system to digitize paper checks, as per local media reports. Digitizing checks will help with better transparency and lesser costs and frauds.
Di Gang, deputy head of the digital currency research lab at PBoC, revealed that the framework or system was built after a year-long research. The lab first unveiled the plans back in 2016 in a bid to alleviate the issue of check fraud in China. The lab had also tested a prototype successfully in January this year.
The new blockchain-based system can tokenize physical checks and enable transactions to be carried out using smart contracts. It was built to concord with the existing Practical Byzantine Fault Tolerance (PFBT). The problem with the existing system is that a considerable number of intermediaries that take up the role of traditional banks to issue checks. This third-party intervention comes with the added risk of fraud and cost.
The new system will help keep a track of its use, whether it’s been redeemed in exchange for cash, deposited as a security or backup corporate assets. It will also act as a digital billing system and will enable shorter transaction times of about 3 seconds and ensure that the transaction is carried out properly in a tamper-proof manner. Once the smart contract rules are incorporated in the blockchain, the data cannot be altered easily. The regulators, however, would be given full access needed to update the code. This will improve the efficiency and eliminate the need for manual cross-checks for the transactions, thus cutting costs.
China is known for its anti-cryptocurrency stance but recently there have been speculations of China lifting the ban. China leads in Blockchain patents and the government is set to issue Blockchain regulations by 2019.
Rosemary is a student, a fitness junkie and a cryptocurrency enthusiast who loves writing.