Blockchain Asia: Technological Solutions to Cultural MistrustBy Feb 07, 2020 4 Min Read
In our first interview with Jochen Biedermann at the Asian Financial Forum, we discussed his role as a Senior Advisor with Frankfurt Main Finance and as the Managing Director of the World Alliance of International Financial Centres (WAIFC).
Jochen Biedermann is also the Founder and CEO of Blockchain Asia which was established in 2016. In this second installment, we discuss Blockchain’s applications throughout Asia, clashes in culture and China’s mission to be the first country with an operating central bank digital currency (CBDC).
Founding Blockchain Asia
When Jochen Biedermann entered the FinTech sector in 2013 he found it to be a much simpler world than the one that exists today, and it was easy for him to stay up to date with all of the different aspects of FinTech development. However, by 2015, he said, “I felt that the technologies were expanding so rapidly it was becoming too difficult to stay on top of all of them, so I had to choose one as a focus and I chose blockchain. From my point of view, this is by far the most interesting area of FinTech development with the most potential for change and disruption.”
According to Biedermann, the power of blockchain’s technology was an obvious enabler to bringing “trust and efficiency” to all kinds of transactions which involve a network of partners. At the same time, Biedermann saw the vast opportunity for Central Asia to facilitate trust and collaboration of the financial centers via blockchain. He said, “In January 2016, I decided to set up a Hong Kong Limited and our headquarters is based close to the Shenzhen border."
The essential mission of Blockchain Asia is to provide realistic solutions and strategies to existing industries and be a point of connection for blockchain projects, experts and investors. Biedermann said, “We now have a network of partners not only in Hong Kong but also in mainland China, Singapore, Korea and of course in Europe.”
In the early beginnings of Blockchain Asia, the impetus was to develop its own projects. Biedermann explained that most of their time is now spent, “Focusing on educating companies consulting and in particular bridging collaboration between Europe and Asia. We help Asian production companies to start a business in Europe and navigate the industry of Germany and other European countries. In the other direction, we have German and European blockchain companies that we help gain exposure and investment throughout Asia.”
According to Biedermann, “Understanding these ecosystems is not easy, whether you're coming from Asia or you're coming from Europe going to the other side. Asia is very much relationship-oriented, but what not many people know is that Germany is also very relationship-oriented. If you don't know the right person, it's very difficult to get into the banking system or get into the German corporates. You need to have a good contact partner, somebody on a high level and get the right introduction. It can be very difficult to do business and this is where we can really help.”
China’s Blockchain Appeal
Among German investors there is a common cultural observation regarding a serious lack of trust in the way business is conducted in China. Biedermann explained, “We see it as if two business leaders meet for the first time in Germany, on a trust scale from -10 to 10 (no trust to absolute trust) German managers might have a trust score of 1 for the new partner. For business exchanges in China, and other places in Asia, the trust scale seems to start at negative 8.”
Issues with trust, however, are a cultural issue, which according to Biedermann have a technical solution in Blockchain. He said, “This was an issue I was aware of in 2016, the need to create trust in the Asian market and between the continents. Now we are seeing very interesting blockchain development solutions in previous problem areas like supply chain provenance, product safety, food safety.”
Blockchain technology has also brought a lot of efficiency to established Chinese’ ecosystems like Alibaba Group, Huobi, and Baidu. Biedermann said, “As these companies integrated blockchain into their own processes, they also began developing Blockchain-as-a-Service (BaaS) solutions and making it easier for ordinary corporates to benefit from blockchain.” He explained, “For small to medium-sized companies, it’s very difficult to get access to blockchain or smart contract developers - these people are in high demand, very highly paid and scarce. BaaS, for many of these smaller organizations, is a good value option.”
In addition, Biedermann noted the interesting developments happening with China’s aim of creating a CBDC (Central Bank Digital Currency). He said, “ It goes without saying that the CBDC development is the most exciting expression of blockchain technology by China. It is a very interesting experiment and I believe if they are successful it will greatly increase China’s influence globally and specifically throughout the Belt and Road development.”
China Will Do CBDC Right
Following the announcement of the Facebook Libra project, China was first to react to the social media giant’s play at money issuance and responded with the announcement that they could create their own Libra- which has now become the People’s Bank of China’s CBDC project.
“China will definitely do it right,” commented Biedermann, “One of the main concerns by most Central Banks globally regarding CBDC development is managing the ecosystem it would create. China has already designed a two-tier system, which feeds the supply down to nine agencies from the Central bank to distribute among citizens and corporates through the six leading Chinese banks as well as payment services like Tencent, WeChat pay, AliPay and Union pay.”
According to Biedermann, the difficulty once the CBDC is launched will be maintaining the balance. "The risk is that all citizens will move their digital currency to the possession of the Central bank and off vibrant markets like AliPay and Tencent. This is because it will be perceived to be, and probably will be, safer to store money with a Central bank. But if everyone did that, it would tie up the bank’s liquidity, which means they are less capable of financing corporates. So maintaining the movement of assets throughout the ecosystem, maintaining the balance is very important to financial markets.”
He concluded, “China is setting up with better methods of controlling inflows and outflows of digital currency, so I believe they are handling it the right way.”