China’s Central Bank has finished developed a blockchain-based system that could replace paper checks by digitizing checks issued by domestic businesses, reported Coindesk on June 5.
The deputy head of the digital currency research lab at the People’s Bank of China, Di Gang, expressed the department has “completed the infrastructure of a system that issues digital checks based on a blockchain with smart contracts technology.”
The ultimate goal of this project is to eliminate check fraud in the Chinese market. In 2016, a lot of money was invested in R&D to solve this issue, and in 2017, a prototype was successfully tested in a virtual environment.
Gang noted that one major concern with the current system is a large number of intermediaries that issue checks such as banks, which enhance the risk of fraud. The country’s financial integrity is at risk if many fake checks circulate across commercial banks.
The bank used practical byzantine fault tolerance (PBFT) to arrive at a consensus and the blockchain-based system can control transactions with smart contracts, while tokenizing checks, he said.
An important advantage of this system is that it can give a transparent overview to regulators concerning the life cycle of a digital check.
“Once the smart contract rules are set in the blockchain, any participant cannot alter the system easily. Even for code updates, regulators will have full access to the record, which increases regulatory efficiency and reduces the cost by removing a manual cross-checking process for transactions.”