China's Financial Firms Urge Regulators to Help Mature Blockchain

China's major financial institutions sent a clear message to innovators in the blockchain industry today, asserting that governance and oversight should not be replaced in any larger transitions to new financial technology.

Speaking at the second annual Global Blockchain Summit in Shanghai, the Shanghai Clearing House (SHCH), the China Securities Depository and Clearing Corporation (CSDC) and the National Internet Finance Association’s Blockchain Research Task Force all discussed how they see the emergence of blockchain technology and its potential impact in China.

Leading the conversation was Lihui Li, of the blockchain research task force and the former director of Bank of China, who perhaps most forcefully struck this tone.

Lihui told the audience:

"We see that centralization is not feature native to the blockchain… [but] decentralization is not a good choice. I think that the application of new technology in [the] financial industry should not be decentralized and ungoverned and deregulated."

Elsewhere, CSDC's Dai Wenhua called for regulators to become involved in the industry as a way to prevent what he called its potential "illegal applications".

Notably, Dai cited incidents like the collapse of The DAO, the first large-scale ethereum smart contract, and the hack of major Hong Kong bitcoin exchange Bitfinex.

"We know The DAO has been hacked and Bitfinex has lost some of its bitcoins, it has shown the loopholes in bitcoin technology, and that means new technologies will bring new risk," he said during his morning talk.

Overall, the representatives displayed an understanding of the technology equal to their peers international, with talks referencing technical bottlenecks that remain to be overcome by technologists.

Calls for collaboration

Like bank tech provider Sinodata in yesterday's talk, Li Ruiyong, vice general manager of Shanghai Clearing House, said his firm is eager to work with partners that could help them further this effort.

Li acknowledged that financial firms should not shy away from potential efficiencies, while also calling for increased study to be conducted on the technology.

"Blockchain technology will have [a] great impact on the financial industry, and for our clearinghouse. It is important for us to research these new [opportunities]," he said.

Li also noted the rising interest in the technology from his company’s peers, citing Nasdaq and the Depository Trust and Clearing Company (DTCC) as examples of how blockchain is being deployed for specific use cases already.

He added:

"We can see it is playing an important role in the financial industry, but it cannot work alone even if we are going to build a brand new ecosystem."

Image via Pete Rizzo for CoinDesk