Posted 7 months ago | by Ben Armstrong

Chinese Free Trade Zone is Testing Permissionless DeFi Applications

The Chinese Free Trade Zone (FTZ) has stepped forward to connect global DeFi communities through a new experimentation on DeFi applications.

In a recent interview with media, Chinese state-powered blockchain project Conflux Network announced its official launch of Tree Graph Research Institute, in a strategic partnership with the Chinese government.

Founder of Conflux and Director of the TreeGraph Research Institute, Fan Long, further explained the scope of the project, saying that the Tree-Graph Blockchain Research Institute will work with local states to develop a regulatory enforcement framework.

Fan said,

“DeFi is a new world and while it appears as though it may pose a challenge for regulators, they appear willing to listen. At this stage, the most important thing is to maintain a reliable communication channel between two sides— the DeFi innovators and the regulators.”

New Ideas for Blockchain in China

Over the past few years, the Chinese government has shown an open attitude towards new blockchain innovations. It reflects the strong influence of blockchain in the world's most populous country.

According to Fan, the complexity of DeFi and other related distributed technologies would make open communication necessary for the continued adoption of legislation.

He suggested that,

“Regulators need a reliable way to learn what the new technique is about and where it might lead us to. Innovators need a way to understand the concerns and red lines of regulators.”

Conflux is Working to Create New Platforms

Conflux has partnered with the Shanghai regulators on many sandbox projects.

Fan noted the incorporation into Shanghai's Pudong Development Bank of blockchain bonding and lending services and the use of the specific regulatory structure of the Shanghai free-trade zone to plan a unique stablecoin for the city.

He stated,

“Shanghai Free Trade Zone is outside of capital control of China where RMB is offshore with its own set of rules, so we are trying to come up with some regulation breakthroughs with experimenting under the free zone framework.”

Fan also pointed out the limit in the CBDC project, saying that global adoption could be the challenge of the central bank’s digital currency, despite its power of financial control.

More Ways to Connect

Conflux either attempts to establish a free zone stablecoin or a public CBDC cross-chain without permission. Made its first move as a research project at Tsinghua University, the project aims to deliver a stable and cost-effective platform where developers can create their decentralized finance applications.

Fan explained that,

“Conflux Network seeks to provide a POW network with transaction speeds an order of magnitude faster. The key enabler technique is a novel DAG-based ledger structure together with an optimistic concurrency control to achieve a consistent order of transactions among all the nodes in the network.”

The founder claims that DeFi initiatives are only able to be accepted through enforcement steps which are intentionally enforced in conjunction with government regulations. As there's still a lot for regulators to fully get along with blockchain and DeFi, Fan has no comment on how regulators will do this.

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