China has made major progress in integrating blockchain technology into its finance system. The State Tax Administration (STA) and National Financial Supervisory Authority (NFSA) published a joint decree to regional tax agencies and banks, compelling the use of both blockchain and privacy enhancing computing to enable data sharing.
This new option for sharing sensitive information directly with banks should help both groups overcome the traditional barrier to effectively assess a small and medium business (SMB)’s financial health, while sharing sensitive information with banks. Therefore, it would potentially provide a solution to two persistent problems.
How Blockchain Transforms SME Lending
Under the new framework, lenders will receive information regarding tax compliance in a standardized, machine-readable form from the tax authority. With the use of privacy computing, banks will be able to evaluate the creditworthiness of applicants for a loan by not having access to the source documents, but only via cryptographic evidence that demonstrates compliance status. The blockchain represents an unchangeable audit trail for each participant, mitigating the opportunity to commit document fraud and allowing for near instantaneous verification.
The policy establishes a new definition of credit. An SMB’s consistent and ongoing history of meeting tax obligations is now a low cost alternative to the physical assets that previously were used as collateral. Transitioning from asset-based to data-driven credit evaluations will facilitate the flow of capital to SMBs that have long been unable to obtain traditional financing.
Proven Results and Scale
The “bank-tax interaction” initiative first became available in 2015 and has successfully provided 15.7 trillion yuan (USD 2.2 trillion) worth of loans to tax-compliant SMEs through 45 million loan requests. Through the 2026 directive will expand this model by mandating blockchain as the underlying infrastructure rather than a pilot technology.
China is reportedly allocating approximately 400 billion yuan per year for the purpose of building blockchain infrastructure for similar types of programs. Implementation of the national data strategy is projected to be complete by 2029.
Parallel Digital Yuan Integration
Recent events in relation to digital yuan (e-CNY) coupled with the directive from the People’s Bank of China (PBoC) to restructure e-CNY balances to become interest-bearing deposits at banks (applicable January 2026) and increased number of banks allowed to provide e-CNY payment processing (22 from 10) as of late March, both are examples of how rapidly growing digital yuan capabilities could be combined into one seamless digital finance environment via the tax-data blockchain and digital yuan infrastructure.
