HSBC Makes World's First Trade Finance Transaction on the Blockchain


HSBC said today, May 14 that it has performed the world's first trade finance deal using one blockchain system instead of multiple platforms. 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 Holdings (NYSE:HSBC) with ING Bank NV handled a letter of credit for Cargill, which relied on blockchain technology developed by the R3 consortium, reports Bloomberg.

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

An announcement made by Vivek Ramachandran, Global Head of Trade Products at HSBC, recently predicted that blockchain technology could operate on a "closed network" basis - with transactions only visible to registered participants - within three to five years. Using the Corda blockchain platform, HSBC and ING were able to complete the exchange in only 24 hours.

The bank issues a letter of credit for the US food and agriculture firm Cargill. The success could pave the way for a blockchain-based trade financing utility.

However, before it can progress further with integrating blockchain into global trade, HSBC needs more banks, ports, shipping companies and customs operations to adopt similar collaborative technology platforms.

The blockchain distributed ledger technology, which underpins cryptocurrencies such as Bitcoin, has the potential to be used for encrypted and unhackable record-keeping across a number of industries.

Putting all of Asia Pacific's trade-related paperwork into electronic form could slash the time it takes to export goods by up to 44 percent and cut costs by up to 31 percent, the HSBC statement said, citing a study by the United Nations. According to the financial services group, "The quick turnaround could mean unlocking liquidity for businesses".

HSBC said the transaction announced on Monday can be replicated and shows the technology is ready to be adopted across the industry.

"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".