What’s Going On?
HSBC has completed the world’s first commercially viable trade-finance transaction using blockchain, reported Financial Times.
Why Does It Matter?
The UK-based banking giant said this first blockchain trade illustrates the platform is ready for broad adoption across general business and industry, reported the FT, opening the door to mass adoption of the technology in a $9 trillion market for trade finance.
The first transaction involved a letter of credit to back a shipment of soybeans transported from Argentina to Malaysia.
The First Of Many?
“This is an inflection point for how trade is conducted,” Vivek Ramachandran, HSBC’s global head of innovation and growth for commercial banking, said in the statement. “With blockchain, the need for paper reconciliation is removed because all parties are linked on the platform and updates are instantaneous.”
Blockchain helps to streamline the traditional paper-intensive process in trade finance, which normally requires between five and 10 days to exchange documents, HSBC told Bloomberg. In the Cargill transaction, the exchange was completed in 24 hours, it added.
Ramachandran compared the introduction of blockchain trade finance to the use of standardised shipping containers in the past, reported the FT. These containers were slowly adopted by ships, ports, railways and trade companies over several decades and in much the same way, counterparties to trade finance will adopt common platforms and standards for blockchain trade finance over the next five years, said Ramachandran.