The Chinese Central Bank has issued 20 Billion Chinese Yuan (CNY) of bonds worth $2.8 billion in an effort to fund small businesses. CNY 404 billion of similar bonds have been issued in 2019, but what makes this latest batch of bonds remarkable is that they utilize blockchain technology.

Essentially, China has developed a blockchain-based system that issues, tracks, and administers bonds, and this batch of $2.8 billion of bonds is the first public test of this system. The point of using blockchain technology is that it is cryptographically secure and immutable, creating a database that is trustworthy.

China is not the first country to experiment with blockchain-based bonds. In 2017 Japan became the first country to issue blockchain-based bonds, although only $813,000 of bonds were issued. China’s bond issuance seems to be the biggest blockchain-based bond issuance in history and is a testament that blockchain technology is ready for mainstream financial use.

Further, China is expected to launch a central bank digital currency (CBDC), which will essentially be a blockchain-based stablecoin for the CNY. Once it is launched, this Chinese CBDC could be used to buy and sell blockchain-based bonds, creating an entire bond market based on blockchain technology. Ultimately, it appears that China could be moving towards basing its entire financial system on blockchain technology.

Overall, it is expected that a blockchain-based financial system in China will increase efficiency and security, while simultaneously decreasing costs of bond and fiat issuance. Notably, blockchain technology also has the potential to increase the Chinese government’s control over the financial system.