UBS "Creating a Trust Engine: How Blockchain Will Transform Finance and the World" PDF Download

On June 27, at the Summer Davos Forum in Tianjin, UBS Group AG (UBS) released its first white paper: “Creating a Trust Engine: How Blockchain Will Transform Finance and the World”.

The white paper points out that blockchain technology creates a viable, decentralized transaction record - a distributed ledger, which allows a single, indestructible master database to be replaced by a large number of proprietary databases. This has the potential to greatly simplify the existing financial system and reduce costs, while making it more secure and reliable. Blockchain technology can also be used to create digital currencies with unforgeable cash properties, while providing a direct and clear value transfer mechanism while retaining the advantages of digital networks.

Q&A with UBS on China’s blockchain exploration

1. What major blockchain activities are taking place in China?

At present, China's main activity in the field of blockchain is the establishment of the China Distributed General Ledger Foundation Agreement Alliance (China Ledger Alliance), a non-profit organization focused on the development of blockchain applications. The alliance is still in the process of specific preparation, but its purpose is to develop and transform existing blockchain technology to meet the needs of Chinese companies and set standards for the entire industry to ensure that the technology complies with China's specific legal environment.

The alliance, led by research and development company Wanxiang Blockchain Labs and based on the R3 CEV distributed ledger and Linux Foundation's Hyperledger project structure, is seen as China's response to the rapidly growing blockchain ecosystem. At the end of 2015, Wanxiang Blockchain Labs hosted the Global Blockchain Summit in Shanghai, successfully focusing global attention on the opportunities that the technology brings to China.

Currently, the alliance has attracted 15 members including financial services companies and technology companies. Alliance advisors include the Internet Securities Professional Committee of the China Securities Association, Tim Swanson of R3 CEV and Vitalik Buterin of Ethereum Foundation. Alex Batlin will also become an advisor to the alliance.

R3 CEV has also been very active in China recently, holding multilateral discussions with financial services companies and regulators. R3 Distributed Ledger also recently signed up its first Chinese member, China Ping An Insurance Group, one of China’s largest financial institutions.

2. How do Chinese regulators respond to the development of blockchain?

Chinese regulators have shown a growing interest in blockchain since the Wanxiang Blockchain Lab hosted the Global Blockchain Summit in Shanghai last year. Like the UK and many other Western countries, regulators appear to be open to the competitive advantages that blockchain can bring to the local financial market. Since then, Chinese regulators have begun to participate in domestic blockchain-related activities to deepen their understanding and engage in dialogue with local and international blockchain projects.

The launch of the China Ledger Alliance comes as regulators and the entire financial system are increasingly interested in blockchain.

Additionally, in early 2016, the People’s Bank of China publicly announced an investigation into digital currencies in response to growing interest in Bitcoin and other cryptocurrencies among Chinese investors.

3. What stage of development are China’s blockchain startups at?

So far, Chinese venture capital investment in blockchain technology has primarily gone to international companies.

But China’s own blockchain startups are emerging, with the most promising being PDX, a blockchain and smart contract startup focused on facilitating privacy-preserving transactions, and Xindi, which uses blockchain to streamline the commercial paper issuance process.

Several established Western startups are also setting their sights on China and will soon expand their operations there.