Blockchain has been a constant source of change and innovation for the financial world. HSBC has now made history, as it completed the first blockchain transaction that involved trade finance. This marks a major point in financial history, since blockchain’s usage has been reserved for non-commercial finance trade in the past.
Typically, this kind of transaction would take about a week to complete, using the paper-based transaction methods that were used before. However, with blockchain involved, it took less than 24 hours to take place.
Much of the point of blockchain is to minimize the time that users have to spend waiting on transactions, like the speed of this trade finance transaction. Normally, transactions of a larger magnitude involve paperwork that takes up more time than necessary.
By bringing the blockchain technology into this area of the industry, it can soon be used for other entities as well, like trade finance, health care, insurance, etc. In fact, professionals estimate that the time needed for exports within Asia Pacific alone can be reduced by 44%, with costs being cut by 31%.
The transaction that is breaking the wall between blockchain and large commercial transactions was for a shipment of soybeans, which traveled from Argentina to Malaysia. HSBC, as the handler for Cargill (a food and agriculture group in the United States), provided Dutch ING Bank NV with a Letter of Credit.
Both banks used a cryptocurrency bank called Corda to make the transaction, which often deals with banks that want to involve blockchain solutions for big banks.
Head of Growth and Innovation at HSBC, Vivek Ramachandran,
“The need for paper reconciliation is removed because all parties are linked on the platform and updates are instantaneous.” He added to the statement, “The quick turnaround could mean unlocking liquidity for businesses.”
HSBC has already noted to other companies considering the same transaction that it is entirely possible. By integrating the blockchain to these types of transactions, they can become more seamless, more secure, and faster. With all of these advantages to integrating blockchain, it is easy to see why more countries and financiers are integrating it into their routine transactions.
Even though last week’s updates from China revealed that they were banning cryptocurrency trading as a whole, they are using ICOs and other activities from these platforms to create a blockchain standard. With national levels of attention, growth should not be a concern. These new opportunities have also attracted the attention of companies like Orange, the second-largest software company, and Facebook, a social media trendsetter.