Chinese President Xi Jinping Recently Proposed to Use the Blockchain

Chinese President Xi Jinping recently proposed to use the blockchain to promote independent innovation of core technologies. The market has different opinions and the mainland has been raging. In fact, the strategic significance of China’s development of blockchains, besides promoting digitalization and financial technology, is to The opening of the renminbi internationalization channel, and more importantly, in the long run, it is necessary to use the blockchain to get rid of the dollar trading system in response to the possibility that the United States may launch financial sanctions against China.

Currently, cross-border transfers are subject to SWIFT (Global Banking Financial Telecommunications Association), which was established in 1973 to address the rapid growth of financial communications in countries that cannot accommodate the rapid growth of international payments and clearing.

At present, SWIFT’s messaging system connects more than 11,000 banks, securities institutions, market infrastructure and enterprise users worldwide, covering more than 200 countries and regions. However, in the Internet era, information was transmitted almost instantaneously, and the use of SWIFT for cross-border payment, the speed of cross-border settlement for one or two days or more, and the specific cost, can not cope with the needs of today’s financial digitalization.

In theory, SWIFT is a neutral institution registered in Belgium, but since the transaction is mainly conducted in US dollars, the United States also has a larger share of transactions than other countries. Once it becomes a target of sanctions, it is equivalent to being kicked out of the organization by SWIFT, cutting off liaison with other banks around the world. A sanctioned object cannot be traded with the outside world, and it is impossible to remit money to other banks or collect money from the bank.

In November last year, the United States officially imposed the “most severely imposed sanctions” imposed by Iran on what the Trump administration called. Immediately, SWIFT said it will suspend the use of its services by some Iranian banks. Because Europe needs to import oil from Iran. The United States has sanctioned Iran through SWIFT. The funds between Europe and Iran cannot be exchanged. Naturally, it is impossible to do business with Iran. It will inevitably affect European oil imports and cause European dissatisfaction.

Two years ago, under the US order, SWIFT was kicked out by SWIFT in North Korea. The country code was deleted. As a result, all banks in the world could not send money to North Korea. This is equivalent to North Korea’s inability to do business with the outside world and cut off North Korea’s funding.

Therefore, SWIFT sanctions are a financial nuclear bomb in the hands of the United States. Once the United States uses SWIFT to impose financial sanctions on China or some Hong Kong banks, it will collapse the financial system of China and Hong Kong. China is almost unable to resist. Of course, the United States cannot easily use this “financial nuclear bomb” because it is equivalent to declaring war on China. But China can’t help but be wary. The best way to counter US financial sanctions is to use the blockchain to trade, establish a new clearing system, and get rid of SWIFT’s unique situation.

Blockchain construction cross-border clearing system Hong Kong becomes the best test site

Therefore, many financial institutions, including banks, are developing blockchain technology. In simple terms, the blockchain will abandon the role of the intermediary bank, enabling point-to-point fast and low-cost cross-border payments. Through the blockchain platform, not only can the transit bank be bypassed, the transit fee can be reduced, but also because of the security, transparency and low-risk nature of the blockchain, the security of cross-border remittances can be improved, and the settlement and clearing speed can be accelerated. Greatly improve the utilization of funds.

Establish a payment system with a blockchain that can be directly cross-border transactions without going through an intermediary.
It is worth mentioning that if a new clearing system is established with a blockchain, cross-border payment must be tested and cannot be carried out in China. Hong Kong is owned by China and the risks are controllable. However, the use of currency is different, and the banking system is in line with the international financial system. It is an ideal test site. It is precisely because of Hong Kong’s special status that it has become the best testing ground for financial innovation in the Mainland. Hong Kong should not be arrogant.