Deloitte: China Will Not Use Blockchain Like a Nuclear Bomb

In the start of July 2019, many media with focus on blockchain (Cointelegraph, Technode, Tokentalk, Crypto Trader, to name the few), as well as those on Asian geopolitics, reported on the alleged application of blockchain as a strategic weapon for military disruption by the Chinese government. They referred to the report by Deloitte. Digital Asset Live has contacted Dr Paul Sin, Deloitte’s Asia Pacific Blockchain Lab Leader, whose words were cited extensively by the above media, for clarifications. Here is what he told to our Editor-in-Chief:

Q1: In the report you state that in China blockchain projects “are driven by top management who use blockchain as a strategic weapon rather than a productivity tool.” Did you use the words “strategic weapon” in the military sense?

A1: Not really. A lot of Chinese enterprises are not using blockchain for digitizing documents, automating processes, or improving productivity. They use it to spend up market entry through facilitating real-time information flow to supply product, capital, and people flow. Hence blockchain or DLT is important companion to strategic initiatives such as belt and road initiative (BRI) or greater bay area (GBA).

Q2: How exactly blockchain may be used as a strategic weapon? What is the potential military application of blockchains?

A2: For instance, an insurance might have to spend 1 year to integrate with one bank partner overseas, thus entering 10 markets would take 10 years. Now they can do this in 3 years as all 10 partners can just download the data nodes themselves and start their integration in parallel.

Although DLT also help the bancassurance relationship to reduce over 80% manual effort, that is tactical, not strategic.

Q3: Many media who wrote about your findings, mentioned that China intends to use blockchain for surveillance. Can you confirm it? How blockchain technologies may be employed in surveillance?

A3: No, surveillance is usually done through AI and centralized Big Data infrastructure, not Blockchain.

Q4: The survey by Deloitte, presented in the same report, highlights that 73% of Chinese executives rate blockchain in their top-five strategic priorities. Why such a high number, could you explain it to those readers, who are far away from Asian politics?

A4: Because in Asia, the region is fragmented into many countries with different sizes, populations, and economic maturities. Unless Europe, we don’t have the EU here. Hence DLT becomes important for governments and corporates to collaborate in such as fragmented market with many different jurisdictions and constraints from data privacy laws.

Q5: 43% of the surveyed Chinese executives said that in the next 12 months their respective companies will invest more then $5M in blockchain technologies, further 31% will make investments that exceed $1M. Where do you think these investments will go?

A5: B2B collaboration enablement, such as trade finance, supply chain traceability, bancassurance, multi-merchant loyalty, etc.

Q6: Which blockchain technologies are of primary interest to China, where both cryptocurrencies and private blockchains are banned?

A6: China banned crypto and public blockchain, and has been embracing permissioned blockchain. The latter is only useful under the context of B2B partnership. If private blockchain means adoption of blockchain by one single organization, then private blockchain is useless.

Q7: China notably holds almost a third of world’s blockchain patents, also blockchain is a priority development in the XIII five-year development plan. Shall we be worried? If yes, of what, in your view?

A7: When China being the biggest trading partners for many countries, having blockchain ready for B2B collaboration will vastly speed up the information exchange across borders in a secured manner. This should benefit all trading partners and I don’t see why we should worry. When I said it’s a strategic weapon, I didn’t mean it literally, like a nuclear bomb. Blockchain, at the end of the day, is just a data distribution technology bundled with cryptography.