By
Mayowa Adebajo
March 12th, 2024
The institute will focus on the ability of the blockchain to settle real-time transactions in a secure and fast way.
Hardly had Li Wei, a department of technology director at People’s Bank of China, unveiled the plans to actively examine and explore blockchain last week, than the central bank of China announced the official launch of a digital currency research institute.
The PBoC came up with the idea of a research institute focused on researching blockchain and digital currencies to fully explore the potential of the technology, test and adopt it to the Chinese financial scene.
Wei underlined that the central bank of China believes in the ability of blockchain technology to settle real-time transactions in a secure, cheap and efficient ecosystem of peer-to-peer users.
“For blockchain technology, financial institutions should combine their findings and technical research to focus on real-time transaction settlement, resource utilization, sensitive information protection and strengthen risk prevention of blockchain technology, to better serve the financial industry and technological innovation”, Wei stated.
It is very important to take into consideration possible risks while adopting the blockchain. Wei confirms that blockchain implementation involves some pitfalls as the technology isn’t mature as of yet.
The opinion is shared by Peter Smith, CEO of the world’s most popular Bitcoin wallet platform Blockchain, who recently said that blockchain is still in its infancy. He believes that the technology is capable of significant improvement of the current financial system but only if it goes through this phase of unsuccessful projects and platforms.
“The Blockchain industry is moving into the Trough of Disillusionment, marked by waning interest as experiments and implementations fail to deliver,” Smith stated. “During this time, many will fail and exit the market, while those that survive will continue to enjoy market success, secure investment dollars and march forward along a path to widespread market adoption.”
Financial companies and institutions need to work on the risk minimization in order to allow the blockchain to commercialize itself for the general consumer base of financial technology. As Wei states, it is crucial for Blockchain technology to become standardized and solve both regulatory and security issues before being implemented into existing infrastructure.
At the beginning of January, the PBoC announced its plans to closely monitor domestic bitcoin exchanges, which at once resulted in the 10% decrease of bitcoin value.
The PBOC had met with three leading bitcoin exchanges in China, BTCC, Huobi and OKCoin, to investigate whether there is market manipulation, unauthorized financing, financial security risk, money laundering, or other issues. It mentioned also that bitcoin is not a currency and thus cannot be used as a real currency.