Breaking ground on digital assets
The Bank of China's investment bank subsidiary, BOCI Hong Kong, announced the issuance of 200 million Chinese yuan ($28 million) worth of digital structured notes on June 12th, assets that were minted on the Ethereum blockchain. This move was made in collaboration with UBS, marking BOCI as, not the first financial institution to issue tokenized securities in Hong Kong, but the first Chinese financial institution to do so.
The deputy CEO of BOCI, Ying Wang, expressed optimism about the development, stating that they are "driving the simplification of digital asset markets and products, for customers in Asia Pacific through the development of blockchain-based digital structured products." This move is part of a broader trend, with UBS expanding its tokenization across structured products, fixed income, and repo financing.
China's complex relationship with blockchain and cryptocurrencies
While this development is undoubtedly a significant step forward, it is essential to maintain a healthy level of skepticism. Despite the Bank of China's foray into blockchain, the Chinese government's stance towards public blockchain-based digital assets remains ambiguous.
China has a complex relationship with cryptocurrencies and blockchain technology. On one hand, it has been cracking down on cryptocurrencies, citing concerns over financial stability and capital flight. On the other hand, it has been promoting the use of blockchain technology for various applications, including the development of the Blockchain Service Network (BSN), which is positioned itself as the default national blockchain in mainland China.
The issuance of digital structured notes on the Ethereum blockchain by BOCI is a move that seemingly contradicts the government's stance on public blockchains. It is worth noting that Ethereum is a public, decentralized blockchain, which is fundamentally different from the permissioned, centralized, maybe DLT based, digital currency that the Chinese government is developing.
Furthermore, while Hong Kong has been more receptive to cryptocurrencies and blockchain technology, it is still under the jurisdiction of the Chinese government. The recent developments in Hong Kong, including the opening of crypto exchange access for retail users and the issuance of a tokenized green bond, are promising. However, they do not necessarily reflect the broader sentiment in mainland China.
Chinese Ethereum pilots remain experimental
While BOCI’s issuance of digital structured notes on Ethereum is a noteworthy development, it is too early to conclude that China is ready to fully embrace public blockchain-based digital assets. The Chinese government's stance towards these assets remains ambiguous, and it is crucial to observe further developments before drawing any definitive conclusions.
As we continue to monitor these developments, we must balance our optimism with a healthy dose of skepticism. The future of public blockchain-based digital assets in China remains uncertain, but one thing is clear: the world is watching.