In recent years, blockchain, with its features of decentralization, security, reliability, transparency of information, and low maintenance cost, has been applied in the fintech industry in more and more cases in China. The maturity of blockchain-enabled technology has improved. This is expected to rebuild the underlying internet technology or will trigger a new round of development and innovation in the Chinese fintech industry. This chapter aims to investigate the current application of blockchain technology in China's fintech industry by analyzing case studies. Through the comparison and analysis of the cases in the fintech industry, this chapter attempts to examine how and whether digital transformation and other innovative technologies can drive new business models and create valuable experiences for consumers and/or firms in China's fintech industry. A variety of challenges and opportunities is analyzed to draw a blueprint for Chinese blockchain development. Finally, this chapter also provides some recommendations to the government.
TopIntroduction
Blockchain technology use in China has seen substantial institutional and policy change from 2013 to 2021. Under the unique economic environment with Chinese characteristics, the institutional setting designed by the Chinese government is used as a unique tool to guide the development of digital finance integrating with blockchain-enabled technology.
This study aims to interpret the interlinked relationships between the policy changes associated with the promotion of blockchain-enabled technology and the development of digital finance in China from an institutional perspective. Case studies of successful and unsuccessful applications in China are used to analyze why some firms and projects can keep running stably and expand rapidly while some applications ended in failure. By analyzing the formation of blockchain and digital finance policies, this chapter helps the readers better capture the future dynamics of China's digital finance development and understand the interrelated reactions of various stakeholders in the industry.
Blockchain technology has attracted much attention not only in people’s work and lifestyle (Guo et al., 2021) and academia, but also in finance and industry (Beck & Müller-Bloch, 2017). The Ministry of Industry and Information Technology of the People's Republic of China (2018) posted a White Paper on China's Blockchain Industry stating that the various characteristics of blockchain technology provide trust mechanisms and have the potential to change the financial infrastructure. Different kinds of financial assets, such as equity, bonds, bills, warehouse receipts, fund shares, etc., can be integrated into the blockchain ledger and become digital assets on the chain, which can be stored, transferred, and traded on the blockchain.
The development of blockchain technology can be broken down into three phases: Blockchain 1.0, 2.0 & 3.0 (Swan, 2015). When it comes to the situation in China, the development nowadays is at the transitory stage from Blockchain 2.0 to Blockchain 3.0. The Chinese government and most enterprises are in the Blockchain 2.0 stage of rapid development and capacity expansion. Therefore, this paper mainly introduces the background of the Blockchain 2.0 stage of Chinese blockchain technology application in the financial sector and its economic impacts on Chinese business. This stage marks the relative application of blockchain technology for other extensive financial applications and the advanced use of more than just simple cash or digital payments and transactions (Albayati et al., 2020). This entails advantages and potential for the deeper application in financial smart contracts, capital markets, and so on.
As the industrial blockchain has been steadily promoted, and the value of the blockchain-enabled industry has been fully verified, one can describe it with the equation: Industrial blockchain 2.0 = industrial chain + asset chain + data chain + technology convergence +CBDC (central bank digital currency) application (Ning, 2021). It means that on the one hand, at present blockchain technology together with 5G, artificial intelligence (AI), cloud computing and other cutting-edge technologies are accelerating the deep integration of industrial development, thus becoming a key cornerstone of the digital economy from the perspective of the industrial chain. On the other hand, it shows that China is presently at the Blockchain 2.0 stage, mainly in relation to the financial sector in China.
The largest difference between Blockchain 1.0 and 2.0 should be smart contracts. Because of the feature of the blockchain technology, smart contracts are a safe and secure technology which can be adopted to stimulate innovation in many kinds of industries, such as supply-chain management, digital healthcare management, finance, and business (Abhinav et al., 2021).