Blockchain 'Perfect' For Trade

Blockchain 'Perfect' For Trade

The transaction was the first scalable live trade finance carried out via the blockchain technology which was an end-to-end trade involving a buyer and a seller and their supportive banks that was performed on a shared digital application instead of using several systems. Last week, a shipment of soybean from Argentina to Malaysia was supported by the letter of credit.

HSBC Holdings (NYSE:HSBC) with ING Bank NV handled a letter of credit for Cargill, which relied on blockchain technology developed by the R3 consortium, reports Bloomberg. The incentive? HSBC sees blockchain as a solution to help boost efficiency in the multi-trillion-dollar funding of global trade.

Traditionally, these transactions take between five and 10 days to complete and typically require numerous paper records that need to be signed by all parties involved.

In collaboration with Dutch bank ING, HSBC said that it has successfully completed the transaction for food and agriculture conglomerate Cargill.

Blockchain-based transactional systems have the potential to eliminate numerous necessary checks and paperwork inherent in trade finance, but both buyer and seller need to be using the same system, or at least compatible ones.

The successful blockchain-based trade deal marks a key step forward for HSBC which has been showing a lot of interest in decentralized ledger technology as well as cryptocurrencies.

According to professionals' estimation, putting all trade-related paper work of Asia Pacific onto the blockchain could help to reduce the time need for goods export by up to 44% and to cut costs by up to 31%.

Ramachandran said that this can enable businesses that trade finance transactions have been made simpler, faster, more transparent and more secure.

ING has also been heavily involved in the trade-based developments on blockchain technology. The members include over 100 banks, trade associations and regulators.

R3 and the group of 12 banks supporting the Corda application are seeking to expand the network on an open basis to drive adoption across the industry.

Ramachandran said that HSBC already has its next client lined up the next transaction.

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