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Blockchain Revolution Series: HSBC Transacts First Blockchain-Driven Letter of Credit of Chinese Yuan
The renowned global banking giant HSBC already clarified back in May’2108 as to how the world’s first commercially viable blockchain trade finance transaction on the Corda platform was successfully executed, that was developed by the R3 blockchain consortium.
For now, they have performed the first blockchain-based letter of credit transaction denominated in Chinese yuan.
The transaction has successfully been executed for the Voltron trade finance blockchain platform which has been developed by the consortium of eight banks, in association with the renowned banking names like, BNP Paribas and Standard Chartered also, as per the reports. Letters of credit is an irrevocable financial instrument that provides assurance from an issuing bank (usually importer’s bank) wherein, an exporter or beneficiary will get paid by the importer (applicant) in a transaction.
Mr. Vivek Ramachandran, Global Head of Trade Products, HSBC, says blockchain technology could revolutionize trade – making it cheaper, quicker and simpler for businesses to trade internationally.
From “letters of credit” to “bills of lading”, merchandise trade today is heavily reliant on paper documents. In the era of the digital, connected universe, there is a growing need to modernize trade’s many paper-based processes. Digitization would reduce bureaucracy, improve security, minimize errors and make it easier to amend documents, ultimately saving time and money.
The letter of credit transaction of yuan-denomination pertaining to a shipment of LCD equipment from Hong Kong to China took place successfully. The transaction elapsed about 24 hours, which comparatively quicker than the standard timeline (i.e. usually 1-week to 10 days).
HSBC stated that deploying blockchain technology in the yuan cases expedites the transaction speed and likely to penetrate a major market. Chinese trade accounts for approximately about 1.2 million letters of credit worth $750 billion last year, as per SWIFT.
While the regional head of global trade and receivables finance for Asia-Pacific at HSBC, Mr. Ajay Sharma, said the bank is moving from small pilots towards a possible commercial rollout of the platform at the end of this year or early in 2020. By which point, HSBC is hoping that the results of its work on Voltron so far will attract other banks to join the effort.