Agricultural Bank of China (ABC) has processed a loan application for $300,000 on a blockchain platform. This is the first time the bank applied the technology for solving a real-world issue. The loan was issued by the bank’s branch in China’s Guizhou province. A farm land was used as collateral to secure the loan.
The bank, being one of the main financial service providers in the country, aims to build a world class commercial banking group with extremely competent and comfortable services, variegated functions and proven value-creation ability.
Furthermore, ABC specializes in loans and other services related to agricultural, industrial, commercial, and transportation enterprises in rural areas. The bank also offers personal banking, wealth management and Forex services and credit card products.
The Agricultural Bank of China explained that other parties involved in the deal, including the provincial branch of the People’s Bank of China, commercial banks, as well as the local government’s Land and Resources Bureau act as nodes for the blockchain system.
The bank also explained that the use of tamper-proof blockchain enables streamlining the loan approval process as all data related to borrowers and collateral are stored in a distributed ledger. Furthermore, the use of blockchain terminates the problem of double spending, a dishonest method of using the same parcel of land as collateral to receive loan from multiple banks.
The third largest Chinese bank aims to enhance its ability to offer loans for farmers who own agricultural land in rural China. The use of blockchain is one of the strategies employed to achieve the objective.
ABC is planning to extend its services by granting loans based on other kind of assets in the future. Earlier this year, the bank has developed an automated decentralized network for providing small unsecured loans to e-commerce merchants who are active in the agricultural sector.
It must be remembered that several banks, non-banking financial institutions and trading firms are adopting blockchain to improve the service and realize cost advantage. By this year end, the Chinese authorities are planning to form National Blockchain Standardization Committee. The Chinese authorities are also planning to fulfill reliability, interoperability and safety requirements.
Already, 12 of the 26 publicly listed Chinese banks have started building their business platform based on blockchain technology. China, ultimately, aims to make blockchain as a “core” technology for the next generation digital economy. The technology has received complete support from Xin Guobin, Deputy Director of China’s Ministry of Industry and information Technology.
China has been one of the countries which have done everything that is possible to wipe of cryptocurrencies and mining business. However, the government is extremely encouraging when it comes to blockchain, the underlying technology of cryptocurrencies. The fact is illustrated by the launch of a $1.5 billion blockchain investment fund by Nanjing, the capital city of Jiangsu province.