HSBC Claims Blockchain Breakthrough for Trade

The use of blockchain by banks like HSBC will reduce the risk of fraud in banking. Kin Cheung  AP

The use of blockchain by banks like HSBC will reduce the risk of fraud in banking. Kin Cheung AP

The LOC backed a shipment of soybeans to Malaysia from Argentina last week.

"HSBC and ING Bank have successfully executed a... finance transaction for worldwide food and agriculture conglomerate Cargill using R3's Corda scalable blockchain platform", the statement said.

HSBC says that the Cargill deal proves blockchain is ready for commercial use, as the deal could also be quickly replicated to allow for fast future trades.

A transaction of this kind would normally take between five and ten days for the full exchange of documents, HSBC said. Using the Corda blockchain platform, HSBC and ING were able to complete the exchange in only 24 hours.

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HSBC successfully completed the trade transaction for USA food and agriculture firm Cargill. 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. Speaking further, he said that "With blockchain, the need for paper reconciliation is removed because all parties are linked on the platform and updates are instantaneous".

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.

According to the United Nations, digitizing all of the Asia-Pacific region's trade-related paperwork could slash the time it takes to export goods by up to 44%, cutting costs by up to 31% and boosting exports by as much as $257 billion a year. "The quick turnaround could mean unlocking liquidity for businesses", added he.

Corda was developed by R3, a New York-based blockchain consortium whose members include more than 100 banks, regulators and trade associations.

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R3, along with supporting banks, is now looking to expand the use of the network as a utility for the trade finance sector.

More banks all around the world seem to be showing interest in decentralized ledger technology which is the same technology that supports cryptocurrencies such as Bitcoin (BTC).

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

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