Economy

HSBC performs first trade finance transaction with single blockchain system

HSBC performs first trade finance transaction with single blockchain system

The settlement covers the movement of bulk soybeans to Malaysia from Argentina, with the letter of credit for this issued by ING, a Netherlands based financier.

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

The transaction demonstrates that blockchain as a solution to trade digitisation, is commercially and operationally viable.

A visibly elated Vivek Ramachandran, HSNC's global head of innovation and growth for commercial banking had said that "this is an inflection point for how trade is conducted". Unlike previous trade finance deals that used blockchain in the past, this was the first time a single shared digital application was employed as opposed to multiple systems. HSBC's trade on the blockchain was completed in 24 hours.

HSBC handled the deal for United States food and agricultural group Cargill, in partnership with Dutch ING Bank NV.

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.

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According to HSBC, it was the first scalable live trade finance transaction using blockchain.

Instead of banking on paper-based records that remain with the stakeholders and are prone to the counterparty default risk, blockchain's decentralized ledger technology is set to overcome these shortcomings. "The quick turnaround could mean unlocking liquidity for businesses", added he.

"It is only by working together that we will create a platform that all those involved in trade want to use, from banks, exporters and shippers to regulators and lawmakers". This is because they will finally be able to carry out transactions using a faster and simpler method while also benefiting from more security and transparency.

R3 and the group of 12 banks supporting the Corda application are seeking to expand the network on an open basis to drive adoption across the industry.

According to Ramachandran, HSBC has another client lined up for another similar transaction.