The application of Bitcoin blockchain technology in the "Belt and Road"

Author: Liang Haiming , Chief Economist of Zhigu Research Institute and Director of Research Department of the Belt and Road Forum, writes for the Financial Times Chinese website

     Although the once famous Bitcoin has received mixed reviews, the blockchain technology on which it is based has been recognized. The function of the blockchain is like a huge ledger that automatically records each new transaction and forms transaction data into "blocks" for accounting, which are stored in an interconnected and shared global network system, and transactions cannot be tampered with at will.

     "Blockchain" technology has the advantages of decentralization, convenience, high security, fast accounting, low cost, mutual monitoring and verification, and open and transparent information. Therefore, in addition to the US Nasdaq Stock Exchange trying "blockchain" technology to handle stock transactions in the private securities market, 22 global large financial institutions such as Citigroup, Japan's Mitsubishi UFJ Financial Group, UBS and Deutsche Bank will also use "blockchain" technology to create a new generation of systems for fast, convenient and low-cost trading operations, hoping to build a leading position in the new international financial trading system. In addition to the financial field, "blockchain" technology has also begun to be used in the fields of protecting intellectual property rights, lawyer notarization, storing personal data and online games.

     Although blockchain technology is gaining more and more attention, it is not without loopholes. For example, blockchain seems transparent and open, but users conduct real-time anonymous transactions, which makes it difficult for the government to supervise; blockchain can be connected to navigation technology, which can easily expose the whereabouts of users. There are also questions about whether the future surge in transactions processed by blockchain will lead to a decline in its efficiency. In response to this, many international financial institutions and technology companies have invested heavily in building blockchain technology laboratories, hoping to overcome the flaws and shortcomings of blockchain technology.

     With the participation of large international banks, financial institutions and technology companies and the widespread application of "blockchain" technology, it will have a significant impact on global finance, business and government policies in the future. Therefore, in promoting the construction of the "Belt and Road Initiative", China should also consider actively applying "blockchain" technology to participate in improving and planning the top-level design of international organizations, especially in the fields of financial interconnection and corporate "going out".

The application of "blockchain" technology can promote the financial interconnection and interoperability of countries along the "Belt and Road"

     The current international financial system dominated by the US dollar has the "Triffin paradox" in terms of mechanism - the United States transfers its financial crisis to the international community through the dominance of the US dollar, which not only severely impacts the global financial market, but also causes financial crises and even economic crises in some regions and countries. In addition, the international currency settlement between countries along the "Belt and Road" is widely used in US dollars, which is not only costly, but also vulnerable to risks such as exchange rate fluctuations, credit risks and depreciation risks.

     To mitigate or avoid these effects, the Chinese government should consider working with governments and financial institutions in the upcoming Asian Financial Cooperation Association to develop a virtual currency system through the technology of "blockchain". This system, in which the rules are jointly formulated by all parties and the credit is established on the basis of a joint agreement, provides a reliable legal basis for the effectiveness and security of its operation. This system is not only an online version of bilateral currency swaps and multi-currency cross-currency swaps, but also an upgraded and intelligent version.

Creating a virtual currency system can, on the one hand, provide Asian countries with a brand new Internet international trading platform and trading environment. On the other hand, for enterprises, it can eliminate the complicated procedures of banks, cross-border payment platforms, exchange and settlement platforms required by existing payment methods, and provide Asian companies with a low-risk, cost-saving, convenient, fast, safe and reliable Internet transaction payment method, which can also be further applied to stock accounts and bank account transactions of people in various countries.

     If the virtual currency system is successfully tested in the Asian Financial Cooperation Association, it can be gradually promoted to countries along the Belt and Road. Since financial connectivity is the basis and support for promoting cooperation in many fields such as trade, investment, and tourism, it can not only strengthen the connectivity between China and countries along the Belt and Road in the financial field, but also strengthen the connectivity between China and countries along the Belt and Road in other fields.

"Blockchain" technology can help Chinese companies further "go global"

     When Chinese companies invest overseas, they are often unfamiliar with a range of issues in the country where they invest, such as local taxes, laws, culture, and the actual situation of the companies they intend to invest in. They worry about being cheated, which leads to many companies wanting to "go global" to look for opportunities, but are also afraid that "going global" will be difficult to move forward.

     In this regard, it is possible to consider digitizing the data of some investors in agriculture, energy, resources, etc. that are to be sold in countries along the Belt and Road. Through the "blockchain" technology, on the one hand, relevant information can be widely and quickly disseminated to global investors, including Chinese companies, for reference by potential investors. On the other hand, the advantages of "blockchain" technology such as high security, mutual monitoring and verification, and openness and transparency can be used as credit endorsement to enhance the mutual trust between investors and investees, making it easier for investors to make investment choices and sign contracts with credit endorsement without having to worry about fraud.

     Conversely, China's surplus production capacity can also be digitized and marketed to potential investors in countries along the Belt and Road using blockchain technology. This can not only reduce transaction and marketing costs, but also allow online crowdfunding in countries along the route and even around the world, and even IPOs (initial public offerings) on the network system. More importantly, it will help solve China's overcapacity problem.

     Another issue that Chinese companies can consider during their overseas investment is how to use blockchain technology to protect intellectual property rights. Data shows that in the past, hundreds of intellectual property rights of Chinese companies were infringed every year during their overseas investment, and trademarks were preemptively registered by foreign companies. For example, the "Feige" bicycle trademark was preemptively registered by Indonesia, "Hisense" was preemptively registered in Germany, and Lenovo had to change to "Lenovo" because Legend was registered in many countries. In addition to the lack of long-term planning and lack of awareness of the importance of intellectual property rights by Chinese companies, the high costs of overseas registered trademark protection and intellectual property maintenance increased the burden on companies, which is also the main reason why many Chinese companies give up intellectual property protection.

     To solve the problem of intellectual property infringement and trademark squatting of Chinese companies overseas, we can consider using "blockchain" technology to create a low-cost, tamper-proof, interconnected global public database. By embedding the information of each registered intellectual property and trademark into the "blockchain" as a "block", once the "block" is permanently confirmed, there is no need to register intellectual property and trademarks in every country.

     It may take several years for the full potential of blockchain technology to become clear. However, in the process of rapid evolution of this technology, we must actively seek to combine it with China's "Belt and Road" initiative and the Asian Financial Cooperation Association, and firmly grasp this Cutting Age, which will not only help promote the construction of this strategy, but also help China to transform from an integrator to a shaper of international economic activities, so as to enhance China's institutional voice in the governance of the global economy, finance and other fields.

(This article only represents the author's views. )

Bitcoin House Note: Regarding the “Belt and Road Initiative”:

In September and October 2013, during his visits to Central Asian and Southeast Asian countries, Chinese President Xi Jinping proposed the major initiatives of jointly building the "Silk Road Economic Belt" and the "21st Century Maritime Silk Road". The "Belt and Road" strategy is currently China's highest national top-level strategy .

"One Belt, One Road" is the abbreviation of "Silk Road Economic Belt" and " 21st Century Maritime Silk Road ". It will fully rely on the existing bilateral and multilateral mechanisms between China and relevant countries, and make use of the existing and effective regional cooperation platform. The National Development and Reform Commission, the Ministry of Foreign Affairs, and the Ministry of Commerce jointly issued the "Vision and Actions on Promoting the Joint Construction of the Silk Road Economic Belt and the 21st Century Maritime Silk Road", which clearly supports Fujian in building the core area of ​​the 21st Century Maritime Silk Road . Xinjiang is positioned as the "core area of ​​the Silk Road Economic Belt".