Asian Blockchain Use is Alive, Well, and Developing

Blockchain technology has attracted a lot of attention in recent years, and has the potential to transform the foundations of our societies and economies. To date, practical applications in financial services have largely been limited to payments and exchange. But as companies and institutions rapidly develop blockchain based systems, wider uses for blockchain technology are being explored.

Even after the global cryptocurrency market’s latest collapse, blockchain innovations, such as crypto-assets and non-fungible tokens (NFTs), remain poised to redefine the fintech sector, particularly in Southeast Asia. Regional governments have so far demonstrated an eagerness to leverage these innovations, allowing the emergence of various blockchain platforms with lucrative funding, as well as technological innovation.

Nevertheless, blockchain has its own development issues, such as the lack of skilled industry workers  and regulations. How can smart contracts develop Asian trade? This topic was discussed in a session at the Horasis Asia Meeting on December 3-4, 2023, in Binh Duong, Vietnam. The event brought together 300 CEOs, entrepreneurs and government representatives from Southeast Asia and beyond to discuss key trends that will shape Vietnam’s economy and drive it toward a new phase of global growth.

Development Limitations

Blockchain technology holds significant promise, and some of the world’s largest financial institutions, including JPMorgan Chase, Singapore’s DBS Bank, and Temasek Holdings, have partnered with regulators to enhance the safety and efficiency of business and investor transactions. 

Finding individuals that possess the required skills to create enterprise-grade blockchain solutions, however, is proving difficult for businesses of all sizes. Particularly in India, there is a serious demand-supply gap when it comes to blockchain technologies. The country will have to find a way to address it or be overwhelmed by the new technology. “Out of the 2 million-odd IT skilled professionals, only 5,000 of them are blockchain professionals,” said Jagdish Mitra, Chief Growth & Strategy Officer at Tech Mahindra – a multinational IT services and consulting behemoth. We have to build our own talent pool with the help of academia because there is no ready pool outside to dip into, he added.

Stringent regulations in certain Asian economies such as China and India are also dealing a blow to blockchain’s future in the region. Citing concerns around financial stability and money laundering issues, the Chinese government intensified its crackdown on cryptocurrency activities in 2021, leading to the closure of many mining operations. China’s share of the mining market has dropped to around 21% by the end of 2021, from as much as 75% in 2018. 

India’s stance towards crypto has also been very tough. Quoting Canada’s central bank governor, India’s finance minister Nirmala Sitharaman has commented that, “…crypto assets should not be given the regulatory seal of approval…without a well thought out approach and framework for implementation.” Meanwhile, the Reserve Bank of India’s governor Shaktikanta Das has said that “there is now a wide recognition and acceptance of the fact that (crypto assets or products) involve several major risks to financial stability, to monetary systems, to cybersecurity issues…and they need to be looked at.”

Blockchain-enabled Smart Contracts

Smart contracts offer substantial advantages to trade, revolutionizing the way businesses conduct their global operations. Smart contracts simplify key processes like order placement, payment settlements, and verification of essential documents, making international trade smoother and more efficient.

Powered by blockchain technology, smart contracts create a decentralized, tamper-proof platform. This strengthens trust and security in trade by cutting out intermediaries, lowering the risk of fraud, and ensuring transparent and unchangeable records of transactions.

Smart contracts can enable quick and automatic payment settlements. They can be programmed to release funds when predefined conditions are met, like confirming delivery or ensuring product quality. This not only speeds up payments but also minimizes transaction costs, making the entire payment process more efficient.

International trade involves complex supply chains with numerous participants, from manufacturers to customs authorities. Smart contracts can automate and streamline various supply chain procedures, including tracking goods, verifying their authenticity, managing inventory, and handling customs requirements. This leads to faster shipping, fewer delays, and improved product traceability.

Smart contracts can incorporate predetermined mechanisms for dispute resolution. By encoding arbitration or mediation processes into the contract, potential disputes can be resolved more efficiently and cost-effectively. This reduces the reliance on traditional legal systems and provides a fair platform for conflict resolution.

International trade often entails navigating a web of regulations, such as import/export laws and customs duties. Smart contracts can include compliance rules and automate the verification process to ensure that transactions adhere to appropriate regulations. This minimizes compliance costs and reduces the risk of penalties due to non-compliance.

However, widespread adoption of smart contracts in international trade necessitates standardization, regulatory support, and robust technological infrastructure to facilitate their global implementation. Without these, the large-scale adoption of smart contracts could be hampered, and their potential for enhancing international trade could be unmet. Regulators and industry players should cooperate to establish ground rules around blockchain-powered innovations to unlock the benefits they can bring — and to keep the use of these technologies safe and secure.

Photo Caption: Blockchain continues to hold immense potential.