The Chinese government is to use blockchain technology for social security payments such as unemployment benefits and pensions. According to China Daily, Wang Zhongmin, vice-chairman of the National Council for Social Security Fund states:
“There’s no doubt that blockchain technology will be used in the social security system because of its valuable applications in the investment and management of social security funds.”
The National Council for Social Security manages almost $300 billion with a budget increasing yearly by 24.6 percent. Due to blockchain’s ability to cut out middle men, they are hoping to decrease costs and increase efficiency with clearing, settlement, payments and record keeping made easier by blockchain technology.
This is the latest sign of the Chinese government embracing blockchain technology and seemingly moving towards promoting it just as Shanghai is to welcome the industry on what is likely to be the biggest blockchain event ever with household names expected to make numerous announcements.
There are indications that one such announcement may be from the Chinese government itself or consortia/alliances connected to the Chinese government but we have no concrete information.
China Rising
In what may be this decade’s biggest surprise, the Chinese are leading the world in the adoption of these new technologies. Fintech is mainstream there. Internet giants such as Tencent and Ant Financial handle more than half of all payments in China, with these two giants engaged in an epic battle for market domination.
To just indicate the scale of these two companies, Tencent’s WePay only recently stopped subsidizing almost $50 million in banking transaction fees for just the month of January while Ant Financial recently raised $4.5 billion, making it the biggest fundraising by a Fintech company.
China’s lack of any banking infrastructure as we know it in the west, combined with the invention of the internet, has allowed entrepreneurs to fill financial needs by jumping to the newest technology. QCodes are everywhere, they send money through their instant messaging apps, they chat to robo-advisors, the Chinese millennials demand their money is invested in an hour – waiting a day, let alone longer, is a no go.
Blockchain technology will be used in China's social security system because it can facilitate trade and lower transactions costs, according to Wang Zhongmin, vice-chairman of the National Council for Social Security Fund. "There's no doubt that blockchain technology will be used in the social security system because of its valuable applications in the investment and management of social security funds," he said.
Wang said blockchains can enable people to trade freely and lower transactions costs.
At the end of 2015, the National Council for Social Security Fund had 1.9 trillion yuan ($284.5 billion) in funds under management, increasing 24.6 percent year-on-year.
A revolutionary new technology, the blockchain, allows parties to carry out direct transactions without using an intermediary. It does so by providing a means for people to share reliable and tamper-proof lists of information known as distributed ledgers.
"To realize the full potential of blockchains, we will above all need to collaborate on a common platform. At UBS, we think it is essential that the industry avoid a standards war of the type that has bedeviled the adoption of new technologies in the past," said Axel Lehmann, chief operating officer for UBS Group.
Lehmann said the good news is that such collaboration is happening. There are already several significant large collaborative efforts. For example, many banks, including UBS, have been experimenting intensely with the technology and working with peers in open, collaborative ways.
At the moment, China's main initiative in the blockchain space is the China Ledger Alliance, a noncommercial organization focused on research and development of blockchain applications. Led by research and development company Wanxiang Blockchain Lab and similar in structure to international collaborations, it can be considered China's answer to the rapidly evolving blockchain ecosystem.
The aim of the alliance is to adapt and develop existing blockchain technology to the needs of Chinese businesses and set standards across the industry to ensure regulatory compliance in China's legal environment. The alliance counts 15 members, including both financial services firms and technology companies.
Early this year, China's central bank announced its investigation into digital currencies as an answer to the growing interest of Chinese investors in bitcoin and other crypto-currencies.