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The Bank of China, one of the four largest and oldest state commercial banks, along with China UnionPay (CUP), supplier of bank cards for the Chinese financial industry, have signed an agreement to cooperate in the development of mobile payment strategies using blockchain technology.

The information was released on August 15th, 2018 through the Bank of China website, explaining that they will launch a one-month promotion to include the use of QR codes so customers can spend, transfer, and trade through the mobile payment application supported in the cloud and using blockchain technology. During the promotional one-month period, the new instant payment service will be implemented in shops, supermarkets, and public transport, where payment points will be installed and an advertising campaign will run alongside.

The announcement says that the new service is implemented in response to market demand and complying with the regulatory requirements demanded by the Chinese State.

The publication states that the two companies have achieved remarkable joint results in the areas of bank card issuance, product innovation, and mobile payment, such as Apple Pay, payment with QR code and Cloud payment application with the purpose of improving the customer experience and maintaining the leadership position in the industry.

Cryptocurrencies or blockchain technology?

Cryptocurrencies such as Bitcoin use Blockchain technology to carry out transactions. This disruptive technology eliminates financial intermediation (banks) while guaranteeing security, immediacy, and anonymity of transactions.

Previously we have seen how China has strongly regulated cryptocurrencies, specially ICOs. One of the purposes could be that the financial state institutions see them as a threat to the current financial model, since part of the income of the financial sector is through financial transactions fees. Cryptocurrencies such as Bitcoin pose a threat due to their lack of intermediaries because they are based on a decentralized model where transactions are achieved through a network of miners and nodes responsible for carrying out the operation immediately with a minimum cost, equivalent to or less than $0.01.

For this reason, financial institutions are being forced to develop blockchain solutions which are centralized, taking the advantage of this technology (speed and low cost) but losing a key point, which is anonymity and decentralization. Furthermore, banks can adjust the commission fees to whatever they want.