The People’s Bank of China (PBoC) has completed its initial work on a blockchain-based system that digitizes checks issued by domestic businesses, CoinDesk reported referring to an op-ed by a senior PBoC official.

Di Gang, deputy head of the digital currency research lab at the PBoC, wrote that the department "completed the infrastructure of a system that issues digital checks based on a blockchain with smart contracts technology."

The lab first revealed its plans to explore blockchain potential to address the problem of check fraud in the country back in 2016 and commenced a year-long research and development process. In early 2017, the agency tested a prototype in a virtual environment.

In the existing system, there are large numbers of intermediaries that assume the role of banks to issue checks, Di noted. He said that this amplifies the risks of fraud, adding that this could lead to the circulation of fake checks among commercial banks, potentially undermining the integrity of the country's financial system.

Di said that the blockchain platform has been built to arrive at consensus with the use of practical byzantine fault tolerance (PBFT). The solution would enable tokenizing checks, while transactions can be controlled using smart contracts. The blockchain-based system will provide regulators a transparent overview of the complete life cycle of a digital check.

"Once the smart contract rules are set in the blockchain, any participant cannot alter the system easily. Even for code updates, regulators will have full access to the record, which increases regulatory efficiency and reduces the cost by removing a manual cross-checking process for transactions,” Di added.

He said that the platform has achieved initial results in the experimental production environment, providing powerful technical support for further innovation and development.