China and Australia deepen blockchain links

China and Australia deepen blockchain links

A group of Australian blockchain start-ups, including Labrys, Beam and AgriDigital, are in Shanghai this week, on a trade mission organised by Austrade and the Australian Digital Commerce Association.

Over the weekend, the entrepreneurs completed a boot camp run by members of the embassy, including a session on how to protect their intellectual property. On Monday, they visited several of China’s largest fintech companies, including $US150 billion-valued ($211 billion) Ant Financial’s Shanghai headquarters in the city’s Pudong district.

China’s fintech market towers over all others. Ant operates the world’s largest online and mobile payments platform – with 520 million users. It has also been investing in blockchain, devoting part of its blockbuster $US14 billion Series C funding round earlier this year to the new technology.

An example is the blockchain-based cross-border settlement service it launched in June to manage fund transfers between Hong Kong and the Philippines.

Ant Financial’s Alipay payment system has 520 million users. An Austrade delegation of blockchain start-ups visited its Shanghai headquarters on Monday.

Qilai Shen

The delegation will then hit the Wangxiang 4th Global Blockchain Summit, which is being held at W Shanghai The Bund on Tuesday and Wednesday.

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Mind-blowing experience

According to a delegate who attended the event last year, it will be a mind-blowing experience for the start-ups, revealing China’s ambition to be a central player as the new “internet of value” develops.

The Chinese government has cracked down on bitcoin and initial coin offerings (ICOs) but this does not mean it wants to stifle investment in the technology underlying them.

The crypto news service Coindesk has been reporting widely on China’s blockchain pilots, including by its central bank, which is apparently testing a blockchain trade finance platform and has built a blockchain-based system that digitises cheques – allowing for them to be tracked.

Blockchain is being tested by Chinese tech giants including Alibaba, Baidu, JD and Tencent. The Wangxiang 4th Global ...
Blockchain is being tested by Chinese tech giants including Alibaba, Baidu, JD and Tencent. The Wangxiang 4th Global Blockchain Summit takes place this week in Shanghai.

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It could also be considering issuing its own digital currency using the technology.

Legal approval

It seems the judiciary is also getting on board; China’s first internet court in Hangzhou recently ruled blockchain-based evidence was legally admissible in a copyright infringement case.

Ant Financial’s parent company, the internet giant Alibaba, has made  90 patent applications focused on blockchain-related technologies, according to a  report in iPR Daily, an IP trade publication. Tencent and Ping An Insurance are also actively filing blockchain patents.

Some of these are in market. Tencent has piloted an app on its WeChat messaging service using blockchain to speed up reimbursing corporate employees’ expenses. Another e-commerce giant, JD.com, has launched a “blockchain-as-a-service” platform to track corporate invoices.

With the exception of ASX’s project to replace its CHESS equities clearing and settlement system with blockchain, many pilots of the technology in Australia are merely dipping toes in the waters.

Nevertheless, China is paying close attention to Australia’s role chairing the International Standards Organisation (ISO) group (known as Technical Committee 307), which is developing standards for blockchain.

China sees Australia as a more trustworthy leader of this work than, say, the United States or Russia, which also wanted to run this committee.

Chair of the ISO/TC 307 Craig Dunn will tell the Wangxiang summit that Australia wants China closely involved in the standard setting.

Blockchain irony

There’s an irony in China embracing blockchain, given the technology was initially designed to circumvent state control.

In his presentation, Dunn will mention several aspects of blockchain which challenge China’s political philosophy. It “can establish trust where mistrust of central authorities or institutions applies”, he will say.

It can also protect property rights by creating immutable records, allow citizens to “own, control and monetise their own data”, and delivering greater privacy and control of personal data.

But China’s government – just like regulators abroad in many Western jurisdictions that are also exploring the technology – are more likely to be interested in blockchain’s ability to create greater transparency around transactions, which will allow authorities to conduct more detailed oversight and monitoring.

As The Economist put it recently: “Shorn of their anonymity, distributed ledgers can be a boon for regulators: they can provide visibility, for instance on who owns what.”

Blockchain R&D in China is also emerging as a geopolitical issue. “Chinese authorities see blockchain technology as a potentially useful, disintermediating tool for advancing its regional interests, especially in trade,” said Michael Casey, the chairman of the advisory board of Coindesk, in a prescient article last year. “Much work is being done, for example, to incorporate smart contacts, tokens and other aspects of blockchain technology into supply-chain management systems that enhance information-sharing and efficiency.”

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