Widely seen as a groundbreaking technology poised to drive the next wave of global transformation, blockchain has captured significant public attention.
In December 2019, the Financial Technology Committee of the People’s Bank of China stated that oversight of fintech would intensify in 2020, with new rules expected in areas like personal financial information protection and blockchain. Industry experts view fintech as a key driver for modernizing financial institutions and a crucial engine for China's financial system, with blockchain standing out as a major innovation frontier.
Against this backdrop, how are banks innovating with blockchain? What changes will it bring to China's banking sector, and what challenges does it face in practice? To explore these questions, The China Business Herald spoke with Ye Boyu, Director of the Digital Excellence Center at Industrial Bank’s Information Technology Department.
Ye notes that blockchain still faces technical constraints that limit its widespread use in finance. He also points out that many commercial banks have a limited understanding of the technology. "We must return to first principles—focusing on blockchain's core attributes rather than the technology itself—and apply it to the right business scenarios to solve real problems. Only then can we unlock its true value."
Transforming Financial Services
The China Business Herald: With the rise of fintech, blockchain's decentralized architecture has drawn widespread interest. What impact will it have on the current financial models of commercial banks?
Ye Boyu: Fintech, led by blockchain, has gained global momentum. Its ability to address information asymmetry, reduce reliance on intermediaries, and break down data silos is reshaping how banks operate. This is evident in several ways:
First, it can help establish unified credit standards, easing financing challenges for SMEs. Their opaque finances and higher risk often hinder loan access. Blockchain can build standardized credit frameworks, reducing information gaps and making financing more accessible.
Second, it streamlines verification and improves review efficiency. Blockchain's tamper-proof, traceable data ensures secure information sharing, cutting down time spent on customer checks and transaction monitoring.
Third, it optimizes workflows by integrating clearing and settlement. Using distributed ledgers and consensus algorithms, blockchain ensures all participants have consistent records, eliminating reconciliation needs. Smart contracts enable real-time settlement, merging clearing and payment functions to significantly lower operational costs.
The China Business Herald: Where has Industrial Bank piloted blockchain, and what's next?
Ye Boyu: We recognized blockchain's transformative potential early and began exploring applications in 2018. Our current focus includes supply chain finance, electronic contracts, asset securitization, and blockchain-based invoicing.
Moving forward, we will work with core enterprises to develop tailored blockchain solutions and expand into areas like digital evidence preservation, digital bills, and information sharing.
The China Business Herald: How is Industrial Bank organizing its blockchain efforts?
Ye Boyu: In 2018, we formed a dedicated team for blockchain R&D and application, focusing on both theory and practice. This team has explored uses in supply chain finance, digital evidence, electronic bills, payments, and data sharing.
We plan to further strengthen talent development, build robust training systems, and cultivate high-level teams to lead blockchain adoption in finance.
Persistent Challenges in Finance
The China Business Herald: What are the main pain points and challenges for banks implementing blockchain?
Ye Boyu: From a bank's perspective, there are three key hurdles:
First, many banks still have a superficial understanding of blockchain. It's more than a tool—it's a new mindset. We must apply it thoughtfully to real business problems, not just adopt it for its own sake.
Second, aligning interests and data-sharing willingness between banks and enterprises is difficult, making effective alliances challenging.
Third, the regulatory framework is underdeveloped. Banks struggle to define safe boundaries for piloting or scaling blockchain applications. As risk-averse institutions, this caution naturally slows broader adoption.
The China Business Herald: Are there technical bottlenecks holding blockchain back in finance, and how should banks address them?
Ye Boyu: Based on our experience and industry research, yes, technical bottlenecks remain a barrier to widespread use.
First, as an emerging technology, blockchain has security vulnerabilities—in P2P networks, consensus mechanisms, data confidentiality, and smart contracts. Given banks' high security standards, whether blockchain can meet rigorous real-world tests is still unproven.
Second, it's hard to balance node scale, performance, and fault tolerance. Bitcoin's Proof-of-Work (PoW), for example, scales well but has very low throughput. Byzantine Fault Tolerance (BFT) mechanisms perform better but degrade with too many nodes.
Third, there's no unified technical standard for blockchain infrastructure. This makes it hard to evaluate platform security and stability, and limits interoperability across different systems, hindering cross-industry collaboration.
Finally, ensuring consistency between on-chain data and real-world information is challenging. Blockchain guarantees data integrity once recorded, but verifying the authenticity of input data requires additional mechanisms.
To address these, banks should: 1) Deploy privacy tech like zero-knowledge proofs and secure multi-party computation, and formally verify smart contracts. 2) Adopt rational architecture design to balance scale, performance, and fault tolerance. 3) Push for industry standards and research cross-chain solutions for interoperability. 4) Integrate blockchain with IoT, 5G, and AI to reduce manual work and improve data reliability.