Published: Tue, May 15, 2018
Finance | By Claude Patterson

HSBC says performs first trade finance transaction using blockchain

HSBC says performs first trade finance transaction using blockchain

According to HSBC Singapore, the blockchain transaction involved a bulk shipment of soybeans from Argentina, through Geneva's trading arm of Cargill, to Malaysia, through Cargill's Singapore subsidiary as the purchaser.

The transaction demonstrates that blockchain is a commercially and operationally viable solution for trade digitization.

An announcement made by Vivek Ramachandran, Global Head of Trade Products at HSBC, recently predicted that blockchain technology could operate on a "closed network" basis - with transactions only visible to registered participants - within three to five years. This exchange was done in 24 hours.

HSBC handled the deal for USA food and agricultural group Cargill, in partnership with Dutch ING Bank NV. The transaction was an end-to-end trade between a buyer and a seller and their respective banks that was completed on one shared digital application rather than multiple systems.

It's a lot less exciting than some of the other blockchain technologies we've been promised, which have ranged from decentralised currencies like Bitcoin to literal diamond exchanges, but it's probably the most sensible indication yet of the future direction of the technology.

HSBC said that while other trade finance deals have been carried out using blockchain together with other technologies, the Cargill trade was the first to use a single blockchain application, the report indicates.

Referring to a study of the United Nations, HSBC said that using blockchain and transforming all trade-related paperworks into the electronic format can cut the time by up to 44%, and expense by up to 31%, in exporting goods. According to the financial services group, "The quick turnaround could mean unlocking liquidity for businesses". He pointed out that blockchain technology eliminates the need for paper reconciliation because all parties are on one platform and updates are handled instantly. An email statement revealed that the R3 consortium created the blockchain technology used to facilitate the trade deal. The members include over 100 banks, trade associations and regulators. It was developed by R3, a blockchain consortium based in NY. Corda is supported by 12 banks and this will hopefully allow it to bring the technology to market quickly and on a global scale.

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