The China National Clearing Center has signed an agreement with three major banks to use their blockchain forfaiting platform to enhance its letter of credit system.
The CNCC (China National Clearing Center), the clearing arm of the PBOC (People’s Bank of China), has reportedly entered a cooperation agreement with three banks to use a blockchain forfaiting platform to improve its own electronic letter of credit system.
The three banks – China CITIC Bank, China Minsheng Bank and Bank of China – together operate the platform, which was initially launched in 2018 by CITIC.
Since launch, the blockchain forfaiting platform has processed transactions worth CNY 300 billion (USD 44 billion), and now operates as a consortium of 43 members, enabling contract standardisation and secondary market trading in forfaiting assets.
Forfaiting is a means of financing commonly used by Chinese exporters to obtain immediate cash by selling their medium and long-term receivables at a discount.
The CNCC intends to use the blockchain technology underlying the platform to improve security, reliability, and transaction processing in its letter of credit system, which was launched in December 2019.
The upgraded system will be integrated with the PBOC’s payment system and is expected to become an “important part of the national public financial infrastructure”.