The Singapore division of UK-based HSBC says it has performed the first live trade finance transaction using blockchain-inspired technology. R3’s Corda platform was used in a transaction that saw soybeans traded from South America to Asia. The deal highlights the expanding use cases of blockchain-related technology in the financial sector.
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HSBC Singapore used R3’s Corda platform to issue a letter of credit to Dutch bank ING on behalf of the controversial food giant Cargill to back a shipment of soybeans from Argentina to Malaysia. The bank claimed it is the first end-to-end trade finance transaction to be completed using a blockchain or DLT platform. Per HSBC, the exchange of letters of credit in such transactions typically takes five to ten days using conventional methods, but in this case it was completed in 24 hours.
HSBC’s head of growth and innovation, Vivek Ramachandran, 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.”
HSBC said that the letter of credit exchange could be repeated so long as the same counterparties were involved in a new deal. However, other parts of the transaction, such as the bill of lading, were completed using conventional methods.
Though seen as a breakthrough in trade finance, the letter of credit application is not the only application ready for commercial usage on Corda. In late April, it was announced that a syndicated loan platform developed by Finastra, R3, and seven international banks was ready for live use.
The developer of Corda is R3, a software firm that has been working with more than 200 banks, financial institutions, regulators, trade associations, professional services firms, and technology companies to create the platform.
Corda uses smart contracts to allow parties to transact directly on private networks that make use of a system of shared ledgers. Designed as an enterprise-grade platform for the financial industry, Corda’s technology is not strictly a blockchain in the traditional sense, though it is “heavily inspired by blockchain systems.” One of its developers, Mike Hearn, worked on bitcoin early before quitting over frustrations with the project.
R3 and its partners are facing ample competition from other parties who are also attempting to leverage blockchain technology for enterprise applications.
Tech giant IBM is building a blockchain-based platform for trade finance called Batavia in partnership with the Bank of Montreal, CaixaBank, Commerzbank, Erste Group, and UBS. It was announced in April that pilot transactions had been executed on the platform. The company is also working on other blockchain products, including a supply chain project with Walmart, financial industry products, and identity systems.
Many other large technology firms are currently considering or developing blockchain-based products as well. Most, like Corda, are looking at the database side of the technology and avoiding cryptocurrencies. Microsoft has its Azure product, while Amazon recently revealed new blockchain products for its Amazon Web Services division. Facebook recently announced it was starting a blockchain team, and possibly a cryptocurrency. Google is also reportedly looking at the technology as well, though they haven’t made any official announcements to date. And Apple has filed a patent application for a product that could potentially use blockchain technology.
R3 has also ventured into cryptocurrency, being involved in a project with Singapore that worked on tokenizing the Singaporean dollar using Ethereum.
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