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China’s new blockchain infrastructure to Digitize Securities Market Using Blockchain

The digital yuan seen on a mobile phone. Costfoto/Barcroft Media/Getty Images

The China Securities Regulatory Commission (CSRC) is interested in digitizing much of the securities and futures markets using alternatives such as blockchain and smart contracts, according to discussions that took place during the China Securities Industry Alliance Chain and OTC Alliance Chain Special Work Symposium held recently in Beijing. Jiang Dongxing, deputy director of the Science and Technology Regulatory Bureau of the CSRC, made some important remarks on the topic.

Dongxing referred to blockchain as a "key technology and infrastructure" that could support the digital "transformation" of the securities industry. This technology is part of China's "14th Five-Year Plan," which are roadmaps developed by the Communist Party to shape the key goal of the economy over the next five years. Blockchain, along with artificial intelligence and big data, is mentioned in the latest plan.

Dongxing also pointed out that the attractiveness of blockchain is to establish a trust mechanism in the network environment, and that it will be the key information infrastructure for the securities and futures industry in the digital space after the proposed digitization.

For example, China has built a central supervision chain for the CSRC, an exchange chain, a securities alliance blockchain, and others. Regulators are planning to build a new blockchain infrastructure, Dongxing said, based on a "two-tier structure": a blockchain for custody, and business.

In this sense, China seems to intend to apply the underlying technology to cryptocurrencies in a way that goes against the direction of the industry; in fact, this new blockchain infrastructure will be centralized, "unified," interconnected, and will aim to create "common governance."