HSBC Holdings announced that it had completed its first scalable blockchain-based trade finance transaction through which it has concluded that blockchain is ready for mass adoption in the trade finance market.
HSBC revealed that it concluded that blockchain is a commercially viable technology after processing a letter of credit on behalf of Cargill, a large food and agricultural conglomerate based in the U.S.
It was an end-to-end transaction that was carried out on a shared digital application between the buyer, seller, and the banks involved. An email statement revealed that the R3 consortium created the blockchain technology used to facilitate the trade deal.
Vivek Ramachandran, the head of innovation at HSBC Global described the successful blockchain transaction as an inflection point for trade. He pointed out that blockchain technology eliminates the need for paper reconciliation because all parties are on one platform and updates are handled instantly.
Blockchain To Enhance Finance
The company in one of its statements pointed out that blockchain helps to enhance trade finance which is usually a lengthy process that involves a lot of paperwork. The successful blockchain-based trade deal marks a key step forward for HSBC which has been showing a lot of interest in decentralized ledger technology as well as cryptocurrencies.
Future Currency- e-Krona
In January this year, the London-based bank sent a letter to its clients, through which it pointed out some of the issues that are in the Swedish economy. It even touched on the possibility of a future that would involve a national cryptocurrency called e-Krona. This is on account of the fact that Sweden is one of the countries that have adopted a cashless economy.
HSBC is also one of the major European banks that have been involved in a partnership aimed at forming the Digital Trade Chain. The latter is a trade finance and supply chain management platform that is based on blockchain technology. It was developed with the goal of facilitating inter-border trade especially for small and medium businesses that use the decentralized ledger technology to reach out to all the involved parties as part of their goal of achieving an international trade.
HSBC has thus been actively involved in research geared towards blockchain, and the recent test is proof that it is the way to go in the future especially given the huge advantages to be gained. The transaction was completed within 24 hours which is significantly faster than the outdated system which takes days to complete such deals.
The announcement is excellent news not only for the bank but also for the companies involved in international trade finance. This is because they will finally be able to carry out transactions using a faster and simpler method while also benefiting from more security and transparency. Such advantages will provide a huge boost to economic performance by allowing enterprises to achieve more at a faster rate.
Adoption of Blockchain in Banking
Thailand’s Central bank also announced a similar blockchain-based consortium involving some of the top banks in the country. Veerathai Santiprabhob, the Governor of Thailand’s central bank, had this to say about the move towards blockchain.
“With this infrastructure sharing, banks do not need to invest on their own. Interoperability enhances efficiency, reduces costs in our financial sector and addresses the needs of the consumer and the business sector.”
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).
Financial institutions in Wall Street also seem to be opening up to the cryptocurrency market despite massive opposition just a few months ago. Recently, parent of NYC announced its plan to launch a crypto exchange.