According to reports, The Agricultural Bank (ABC) of China has provided a loan worth of $300,000 using a blockchain technology. Granted China has not shown welcoming attitude towards cryptocurrencies but it has embraced the technology, underlying cryptocurrencies with open arms. ABC is one of the world’s largest banks by total assets and is the first one to lend loans using blockchain technology by taking agricultural land as collateral. This blockchain system was developed almost a year ago with the technical support from a Hangzhou- based blockchain startup but has only now been put to test.
ABC selected one of its branch in the Chinese province of Guizhou, to put the blockchain system to trial according to the local news source that was reported on Tuesday. However, this is just the beginning because the use of this technology is being incorporated in many of their other branches including other banks, the provincial branch of the People’s Bank of China and the local government’s Land and Resources Bureau.
The Chinese bank has taken these steps so that they could facilitate and provide loans to farmers who own land. It also includes the people who own any land in the country areas of China, to ensure that they can offer agricultural land as collateral.
Why design a system that utilizes blockchain you ask? The answer is twofold. It is to ensure that the system is updated with the data of borrowers and collateral they offered. The manual process of approving loans is arduous, time consuming and archaic. The blockchain system ensures that the data cannot be copied and be falsified. It also effectively guarantees the authenticity and security of the data and customer information. Secondly, it can also save the customers from double spending which means offering the same collateral and getting two loans for the same thing, provided both the banks use blockchain technology.
Nevertheless, Agricultural ventures is not the only one banks will be providing loans to. They have expressed rather a deep interest in extending these services to other people by taking real estate as collateral.
The technology which was at first denied acceptance is now spreading like wildfire in China. Out of the 26 publicly-listed banks in the country, 12 of them have already started working on blockchain. The blockchain technology is readily being developed and their use cases have been increasing. Among these 12 banks, big name include Bank of China, China construction bank and the Agricultural Bank of China.
Developing blockchain based application to offer loan to people in exchange for their land as collateral isn’t the only application the bank has to offer. The China Construction Bank has also incorporated this technology for offering loan across borders and to other banks as well. To the date, the bank has processed transactions amounting to $251 million. Bank of China has also came up with the intention of introducing a digital wallet.
To summarize, the banks in china have largely partaken in the development of blockchain technology for the following purposes,
- Issue invoices and aid in payments
- Offer loans across borders
- Authenticating ID procedures
Once again China has proved how much it revers the groundbreaking technology that is blockchain. On one of the government-controlled broadcaster, CCTV (China Central Television) it was mentioned that,
Blockchain is the second era of the Internet.
The value of blockchain is 10 times that of the Internet.
Blockchain is the machine that produces trust.
But these advances should not be mistaken, because China plans on keeping its banking system centralized. That is why China has put a ban on the sale and purchase of cryptocurrencies along with putting ideas of free asset movements and non government controlled money to rest. There are also plans of creating their own centralized digital currency. Xu Hao, a senior official with the Guizhou government told in a show,
“When talking about blockchain, many people are talking about ‘decentralization.’ I’d like to make a small change to the word. I think the essence of blockchain is ‘de-intermediarization.’ There is no way to get rid of the center.”
Suffice to say, this may just be the start of incorporation of numerous use cases for the blockchain technology in banking system of China. What is now limited to agricultural land and real estate to aid rural revitalization could branch out to many other things.