On July 4, the Shenzhen Municipal Central Bank Branch of the People’s Bank of China and the Shenzhen Taxation Bureau of the State Administration of Taxation signed a strategic cooperation framework agreement in Shenzhen to realize automatic tax filing in the central bank’s trade finance blockchain platform, according to Finance China.
The model is specifically for enterprises to submit tax filing applications online. The People’s Bank of China (Foreign Exchange Administration), the Taxation Bureau and the Bank of Foreign Exchange can use the central bank’s trade finance blockchain platform to inquire and verify relevant information to complete payment and supervision.
At the same time, using the unified ledger and real-time sharing characteristics of the blockchain, the cross-border transaction information is entered from the source of the enterprise, and the bank and the People’s Bank of China (the foreign exchange administration) obtain information in real time and trace back, eliminating manual verification, real difficulty, and false transactions. Such issues have increased the efficiency of companies, banks, foreign exchange and taxation.
This is the latest scene of the blockchain landing at the regulatory level. At present, the central bank’s trade finance blockchain platform has achieved multiple application scenarios, including: supply chain receivables multi-level financing, cross-border financing, international trade account supervision, external payment tax filing form, etc. The business will also be on the market in the near future.
In September 2018, the People’s Bank of China (PBOC) unveiled a blockchain trade finance platform. At that stage, it was still framed as a pilot and involved five banks. Today Chinese media, including 21st Century Business Herald report that so far the solution has processed Yuan 30 billion ($4.5 billion) in foreign exchange transactions.
It now incorporates 28 banks in Shenzhen, which includes 483 bank branches.
The comparatively slow adoption of technology by foreign banks appears to be inhibiting growth. The article states that “cross-border financing is provided by overseas banks” but that “due to the uneven development of domestic and foreign financial technology, the business volume is still small”. Hence it’s possible that currently the project is used more for regulatory compliance rather than finance.
At launch in Shenzhen, it was called the “Bay Area Trade Finance Blockchain Platform” (BATFB) and planned to target the Guangdong, Hong Kong, and Macau Areas. It was developed in conjunction with the Central Bank Digital Currency Research Institute.
The principal purposes were real-time traceability, to eliminate fraud and to reduce the need for manual transactions.
Apart from regulatory monitoring, to date, the applications included on the blockchain are supply chain receivables, cross border financing and international trade supervision. On the 4th of July, it launched external tax filing and the Shenzhen Taxation Bureau signed an agreement with the PBOC for automatic tax filing.
There are also plans to link it to the Hong Kong platform eTradeConnect.
This particular blockchain initiative is focused on cross border transactions, but multiple projects are targeting China domestic trade finance.
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