China Issuing Bonds on Blockchain Is a Sign of What's to Come

China's self-developed blockchain issuance system was put on display for the first time and it will handle the administration and tracking of these two-year bonds with a coupon rate of 3.25%.Though the use of blockchain and other notable features of the issuance contrasts with China's past stance, it may align well with its recently revealed strategy and may have other important implications as well.

China is coming into its own where blockchain is concerned, and its quick pivot toward ledger technology is hardly a bombshell.

Vigilant enthusiasts verify China's penchant for DLTFor the past few years, blockchain and cryptocurrency innovations have been stifled in China to a degree that matches the country's zero-tolerance playbook.

This is a safe guess considering that in terms of both blockchain and cryptocurrency, this year saw China launch both the blockchain bond issuance system and its seminal Central Bank-issued cryptocurrency.

Blockchain does for bonds what a national stablecoin does for fiat: cost-efficiency while leaving the riskier aspects of crypto at the door.

Blockchain is about control Viewed through this lens, the blockchain bond system isn't surprising so much as it is expected.

Other countries' progress in blockchain bonds lends further credence to expectations of China's embrace of similar advancements.

Even the World Bank has issued blockchain bonds via its Bond-i system in cooperation with RBC Capital Markets, TD Securities and the Commonwealth Bank of Australia.

"In the future, one would first treat blockchain as an accounting tool such that the issuance will become more efficient with lots of additional functionality. Of course, the benefits of blockchain do not stop there. With the use of smart contracts, users can pay and receive interests automatically. All in all, using blockchain allows bonds to be traded more easily and will improve the level of automation during the whole issuance process."

Centralized blockchains: the ideal compromise?This may be where China's nascent blockchain ecosystem is headed, and the relatively small issuance in 2019 is merely an indication that the technology is in its experimental early stages.