HSBC has reportedly completed the world’s first commercially viable trade finance transaction with the blockchain, highlighting the advancements the technology has made.
HSBC successfully completed the trade transaction for U.S. food and agriculture firm Cargill. It involved a shipment of soybeans from Argentina to Malaysia. A letter of credit was issued from HSBC to Dutch lender ING, reports CNBC.
The use of the blockchain within the banking industry is steadily gaining ground and is quickly being seen as a possible solution to reducing the risk of fraud, in addition to eliminating a paper trail. Vivek Ramachandran, head of growth and innovation at HSBC, said in a statement, that:
The need for paper reconciliation is removed because all parties are linked on the platform and updates are instantaneous. The quick turnaround could mean unlocking liquidity for businesses.
Unlike the normal five to 10 days that an exchange can take, this one between HSBC and ING only took 24 hours. They also used the Corda blockchain technology, by startup R3, to undertake the trade transaction. R3 is currently working with a consortium of banks to determine blockchain solutions for a range of issues.
While there have been several instances of proof-of-concept transactions performed using the blockchain, this one between HSBC and ING is the first that indicates its commercial applications, a spokesperson said to CNBC.
Traditionally used within the finance world, the blockchain is slowly being applied to other sectors as well such as humanitarian, cross-border payments, supply chain, and food. Due to its decentralised nature and its immutability the technology is regarded as the answer that many industries are searching for.
With the technology making great headway with the world’s first commercially viable trade finance transaction it demonstrates the potential it could soon have with other sectors in the future.
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