The Hong Kong Monetary Authority is poised to become one of the earliest government-backed financial institutions to launch a blockchain-based trade finance platform.
Blockchain Becoming Mainstream
Grasping at the potential behind the blockchain, a number of trade finance platforms underpinned by the distributed ledger technology (DLT) are already available. Back in May, HSBC managed to successfully execute the very first commercially viable finance transaction using the blockchain. Others also joined the ranks as Rabobank and Deutsche Bank partnered up with similar intentions in mind.
However, these remain instances of singular banks, attempting to further explore the benefits of this fairly nascent technology.
Unlike them, the Hong Kong Monetary Authority took a rather different yet definitive approach.
It is set to introduce the first government-backed trade finance platform based on the blockchain. The system, underpinned by the blockchain, is designed by China’s Ping An Group. Marching into the global finance industry that amounts to upwards of $9 trillion, the company’s deputy CEO, Jessica Tan, shares her thoughts, saying:
Instead of individual banks trying to do this you have the regulator trying to bring the banks together
It remains unclear exactly how many banks have partnered up with the regulator but their number is expected to be at least 21.
Why Blockchain?
The new trade finance platform is set to introduce a range of inherent benefits tied to the DLT. One of the core aspects of it is consistent and undeniable access to banking services.
Another important aspect of the platform is enhancing fraud preventions. As trades will be directly logged in the blockchain, parties will be allowed to view the actual level of financing which is requested, hence reducing the possibility of acquiring excessive funding.
Additionally, since the blockchain technology provides for complete immutability, parties can rest assured that each transaction is irreversible encrypted within the blockchain and entirely transparent.
Do you think that the Hong Kong Monetary Authority is setting the tone for a widespread adoption of blockchain-based technology? Don’t hesitate to let us know in the comments below!
Images courtesy of Shutterstock.