China’s blockchain development should learn from P2P lending mistakes, researcher warns

A task force will seek to eliminate risks associated with peer-to-peer online lending platforms after the savings of millions of individuals were trapped

Blockchain, the technology that underlies bitcoin and other cryptocurrencies, was endorsed by President Xi Jinping last week, leading to an increase in interest

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Ezubao, once China’s biggest peer-to-peer (P2P) lending platform, folded in 2016 having collected 59.8 billion yuan (US$8.5 billion) from more than 900,000 investors. Photo: Reuters

Frank Tangin BeijingandYujing Liuin Hong Kong

Published: 6:45am, 5 Nov 2019Updated: 11:35am, 5 Nov 2019

China has been warned to avoid the same mistakes with blockchain that it made with its peer-to-peer lending, as the government vowed a “thorough revamping” of the controversial lending platforms as part of a continuing battle against financial risk amid the domestic economic slowdown and the trade war with the United States.

A specially designated task force is in the process of working towards eliminating risks associated with peer-to-peer online lending platforms, the official Xinhua News Agency reported at the weekend, citing a task force statement.

The task force has been created in response to a series of online lending platform collapses that trapped the savings of millions of individuals who sought financial gain by lending through the platforms, with the resulting public uproar posing a severe challenge to the nation’s social stability. Ezubao, once China’s biggest peer-to-peer (P2P) lending platform, folded in 2016 having collected 59.8 billion yuan (US$8.5 billion) from more than 900,000 investors.

But with interest in blockchain, the technology that underlies bitcoin and other cryptocurrencies, many of which are still banned in China, on the rise after it was endorsed by President Xi Jinping at the end of last month, the government have been urged to take a more cautious approach following the expensive lessons learned from the P2P platforms.

What the government should refrain from doing is to participate directly in industry development plans. It’s better to be a referee trying to make rules and let market institutions tap [blockchain’s] development potential

Tang Jianwei

“What the government should refrain from doing is to participate directly in industry development plans. It’s better to be a referee trying to make rules and let market institutions tap [blockchain’s] development potential,” said Tang Jianwei, a senior researcher with the Bank of Communications.