The banking group HSBC has announced that it has used blockchain to complete the first scalable live trade finance transaction for a letter of credit with USA food and agricultural conglomerate Cargill.
The transaction that has made news dealt with a shipment of soybeans transported from Argentina to Malaysia last week. HSBC used a blockchain platform overseen by the consortium R3 to issue a letter of credit to ING to help Cargill complete the transaction.
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. This exchange was done in 24 hours.
CNBC reported that HSBC had issued a letter of credit for US food and agriculture firm Cargill.
It was an end-to-end transaction that was carried out on a shared digital application between the buyer, seller, and the banks involved.
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HSBC said the technology is "perfect for trade" because it keeps an unchangeable secure log of the transaction and full details of the products being bought or sold, over a much-reduced time span. "The need for paper reconciliation is removed because all parties are linked on the platform and updates are instantaneous. Therefore, it's a key technology we are exploring and using with our own customers and, now, using for ourselves with the completion of this transfer on Corda", explained Rani Misra, Regional Treasurer, APAC, Cargill.
Reports say HSBC utilised the Corda blockchain platform developed by R3. According to the financial services group, "The quick turnaround could mean unlocking liquidity for businesses". The bank then reported that the success of this live transaction builds a firm foundation for the future of trade finance, especially for Singapore.
HSBC said the transaction announced on Monday can be replicated and shows the technology is ready to be adopted across the industry. It was developed by R3, a blockchain consortium based in NY.
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).