Shanghai Stock Exchange (SSE) has published a research paper on the uses of blockchain technology in the securities industry. With 1403 listed companies, the SSE attains a position in the top 5 stock exchanges by market capitalization.

The paper explained that distributed ledger technology is currently in the testing stage in the financial markets, which directly affects peoples’ opinion all over the world. However, if implemented, it could be used for securities issuance and trading, customer registration as well as post-trading processing and settlement.

Using blockchain technology, the SSE would need to eliminate current centralized intermediaries to settle transactions. This could be problematic since there are no proper regulations present in the country.

Blockchain technology is a transformative technology, the government needs to consider how to establish a regulatory framework for distributed ledger technology. Regulation should be developed in parallel with the realization, application and development of new technologies.

In January 2018, the SSE suspended trading for ten companies which were using DLT. The stock exchange has been observing all the companies to ensure that investors were not deceived by fraudulent companies. According to media company Yicai, the SSE felt that DLT was still in a “development” phase, which is why it was a challenge to create “stable” companies.

On Tuesday, Fan Wenzhong, director of international department at China Banking Regulatory Commission, said that people shouldn’t “mythologize” blockchain technology. “Blockchain is a useful innovation but that doesn’t mean cryptocurrencies, which blockchain has given rise to, are necessarily useful,” said Wenzhong at the Fintech Summit held at Shanghai. He also added that distributed ledger technology was not technically a “revolution” since the concept had been present in the world for many years.

DLT development in China is rising every day; World Intellectual Property Organization (WIPO) reported in May that majority of the blockchain patents filed in 2017 were from China.

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