Posted 2 years ago | by Ben Armstrong
HSBC: Blockchian Will Ensure Continuity of Trade Finance amid Global Coronavirus Outbreak
Megabanks HSBC, BNP Paribas, and Citi are among eight major banks which developed a blockchain trade finance platform. The Contour platform will be launched in Singapore later this year. It has already completed a successful trial that involved over $30 million USD in letter-of-credit transactions last year.
Letter-of-credit (LOC) transactions are a payment mechanism widely which is used in international trade. LOCs allow a bank to provide a seller with a guarantee for a buyer’s payment. The system is very old, and is used globally.
Unlike domestic transactions that can be settled easily, international trade is far more complex. The LOC system was at-risk during the crisis of 2008, as it isn't a transparent market. Now that blockchain is being used, it should be much easier to ensure that nations are able to trade with each other, even if there is a massive crisis.
HSBC Has Chosen Blockchain
While the coronavirus is making global markets shakey, HSBC’s regional head of global trade and receivables finance Ajay Sharma said to reporters that the platform can ensure commercial trades proceeds smoothly:
“Leveraging blockchain for trade finance has overcome the physical constraints we are having today.”
Sharma also disclosed that the company operating Contour expects to have around 20 employees as a workforce by the year’s end. For a new technology that was doubted a few short years ago, blockchain is moving into one of the most important markets on earth.
Looks Like Blockchain is a Big Deal
Bank-backed blockchain trade finance platforms are making a move onto the global stage. HSBC, BNP Paribas, Standard Chartered and nine other banks created and launched a platform dubbed eTrade Connect in Hong Kong, in 2018.
There is another trade finance platform called we.trade, which also counts HSBC as a founder bank, among other founders such as Rabobank, Santander, Société Générale, UniCredit, and Deutsche Bank.
The banks collaborated to create a Hyperledger Fabric-powered blockchain to complete its first live operations earlier that year. It would appear that blockchain is everywhere in the global trade sector.
In China, a cross-border trade finance blockchain in three major trading provinces debuted this spring. It was created by People's Bank of China-affiliated initiative run by the country’s foreign exchange reserve regulator.
The current novel coronavirus crisis is demonstrating how poorly maintained the global financial and political systems are. Thankfully, there are new ideas entering the marketplace.