UBS launches white paper on blockchain layout in China's financial sector at Summer Davos (download white paper)

Author: Amber Dingding

From June 26 to 28, the Annual Meeting of the New Champions (referred to as "Summer Davos") was held in Tianjin. This event invited more than 1,700 guests from 90 countries to hold more than 200 discussions on "The Fourth Industrial Revolution: The Power of Transformation". Blockchain, as a hot topic, also became one of the topics discussed in this event. What the experts are most concerned about is how blockchain will be deployed in China's financial sector, and what actions the banking industry will take to combine with blockchain. These are all worth paying attention to.

Blockchain’s “innovation” in the financial sector

Blockchain is involved in various industries, but at present, it is most closely integrated with the financial industry. Large domestic companies such as Ping An of China joining the R3 Alliance and the establishment of Wanxiang Labs have proved with practical actions that blockchain is particularly important for the future development of finance. As a decentralized, distributed ledger underlying technology, all data will be stored in a proprietary database, which may greatly simplify the existing financial system and reduce costs, making it safer and more reliable. Blockchain provides unique, unforgeable, encrypted and stored pseudonyms that can be associated with any number of verified identity information. Individuals within the blockchain network can protect their privacy while verifying their identities, which is exactly the advantage of blockchain.

Axel Lehmann

Axel Lehmann, member of the UBS Group Executive Committee and Chief Operating Officer of UBS Group, said that by providing items with unique, unforgeable identities and unalterable ownership records, blockchain can greatly simplify the direct transfer process of tangible assets and increase trust in their origin. At the same time, by adding full programming capabilities to the blockchain, we can create "smart contracts". This allows us to not only better record financial agreements, but also realize the automatic execution and self-implementation of these agreements.

People will later use this application to connect to blockchain-based financial systems. For example, "smart wallets" can be built into personal, freely programmable portfolio manager-style applications. These applications can trade on behalf of users, even browse the news, and make trading decisions autonomously based on market trends.

UBS releases blockchain white paper to promote laboratory establishment

UBS participated in the relevant activities of the "Summer Davos". At this event, UBS released a white paper: "Creating a Trust Engine: How Blockchain Will Transform Finance and the World". Qian Yujun, head of UBS China, said that at present, China is mainly engaged in alliance activities. In early 2016, the People's Bank of China publicly stated that it would investigate digital currencies in response to Chinese investors' interest in Bitcoin and other cryptocurrencies. However, blockchain may face regulatory challenges in China. Compliance, data security, KYC (know your customer), anti-money laundering, etc. are all major barriers faced by the traditional financial industry. Therefore, transactions under the blockchain framework should still solve the above problems.

UBS's Crypto 2.0 Pathfinder Program is conducting commercial analysis and verification of technology applications in investment banking, wealth management, corporate banking and retail industries. The crypto finance that UBS is currently exploring may be the 2.0 version of financial development.

Axel Lehmann, Chief Operating Officer of UBS Group, said that UBS's blockchain technology experiments include smart bond experiments and "multi-purpose settlement coins" experiments. As for the development of smart bonds, an application was created on the Ethereum platform to reconstruct the bond issuance, interest calculation, coupon payment and maturity process. There is no need for pre- and post-transaction intermediaries to participate, because the software on the blockchain is specially set up to automatically process information and capital flows between issuers and buyers. A secret key is set up and will be connected to the central bank account as a currency linked to the real world.

It is reported that the head of blockchain at UBS Group will attend the Shanghai Blockchain International Week in September, where he will communicate with blockchain enthusiasts from all over the world.

Blockchain deployment in China

With the rise of blockchain fever in the world, China has also joined the blockchain development army. The China Distributed Ledger Infrastructure Protocol Alliance, led by R&D company Wanxiang Blockchain Lab, draws on the R3 CEV distributed ledger and Linux Foundation's Hyperledger project structure, effectively connecting China with the world's blockchain development.

How will Chinese regulators respond to the rapid development of blockchain? Since 2015, when Wanxiang Blockchain Lab held the Global Blockchain Summit in Shanghai, Chinese regulators have become increasingly interested in blockchain. 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. At the same time, the People's Bank of China has publicly stated that it is investigating digital currencies.