HSBC Performs World’s First Trade Finance Transaction Using a Single Blockchain Platform

  • HSBC issued a letter of credit to ING for agricultural giant Cargill.
  • It used a blockchain platform called Corda developed by FinTech startup R3.
  • The paperless trade finance transaction was completed in only 24 hours instead of the usual 5-10 days when lots of paperwork needs to be passed around.

Banking giants HSBC and ING announced on Monday that they have performed the world’s first commercially viable trade finance transaction using a single blockchain platform; this could lead to mass adoption of blockchain technology in the $9 trillion trade finance market.

UK-based bank HSBC issued a letter of credit (LoC) for American agricultural commodities trader Cargill to Dutch bank ING. The transaction involved a shipment of soybeans from Argentina to Malaysia. The letter of credit -- which is a document issued by a buyer's bank to the seller's bank to guarantee that payment will be made to the seller provided that conditions are met -- relied on the use of Corda distributed ledger platform, which was designed and developed for the financial sector by FinTech startup R3. Although this was not the first blockchain technology had been used for trade finance, it was the first time that such a transaction had been completed using only a single shared blockchain platform rather than also relying on other systems.

Although LoCs are widely used for financing trades between exporters and importers, the process usually involves lots of paperwork and requires five to ten days for exchange of documents. Using the Corda blockchain platform, HSBC and ING were able to complete the exchange in only 24 hours. 

Here is what Vivek Ramachandran, global head of innovation and growth at HSBC’s commercial banking unit, said about LoCs:

The reason why letters of credit have persisted is because of two real challenges — the absence of digital infrastructure and the challenge of coordinating multiple parties... This platform helps us overcome the first and I think the technology and everyone focused on it gives us the impetus to go after the second now with hopefully much better results than we have seen in the past.

Vivek Ramachandran, HSBC

Ramachandran added:

What this means for businesses is that trade finance transactions have been made simpler, faster, more transparent and more secure... The need for paper reconciliation is removed because all parties are linked on the platform and updates are instantaneous. The quick turnaround could mean unlocking liquidity for businesses.

Vivek Ramachandran, HSBC

 

Those Banned From Facebook May Not Be Able to Use Its Cryptocurrency Libra

Facebook’s two days of congressional hearings on the social media giant’s cryptocurrency ambitions seemingly revealed that those who have been banned from Facebook may not have access to Libra.

During the congressional hearing Facebook had to answer some tough questions, and one of them came from Representative Sean Duffy, which asked the company’s cryptocurrency head, David Marcus, who’ll have access to Libra.

The Congressman initially asked Marcus who could use the cryptocurrency, to which Calibra’s CEO answered: “anyone that can open a Calibra account, that can go through KYC [know-your-customer checks] in countries where we can operate.”

Duffy then referenced two individuals banned from Facebook for violating its community guidelines, Louis Farrakhan and Milo Yiannopoulo, and asked whether they’ll be able to use the social media giant’s cryptocurrency.

Marcus ended up replying he doesn’t “know yet,” after seeing Duffy hold a $20 bill and ask hin who can use it. His point was that cash doesn’t discriminate, and that anyone who can hold it can use it.

While throughout the hearing Marcus tried to point out the company will follow appropriate regulations and comply with lawmakers, Duffy responded that a proper answer would be “as long as you abide by the law, you can use Libra.” The fact he didn’t get this answer, Duffy said, gave him “great pause.”

Speaking to The Daily Beast Elka Looks, a Facebook spokeswoman, clarified Marcus addressed the Congressman’s concerns later on in the hearing. She stated:

For Libra, anyone who is engaging in lawful activity will be able to transact on the network. Facebook will have no say. For Calibra, there is no policy in place yet, but we will share it when it is closer to being finalized.

The news outlet adds that Calibra, Facebook’s wallet to send, receive, and hold Libra, doesn’t yet have final terms of service or a privacy policy. All of this means that those who’ve been banned on Facebook may not have access to its cryptocurrency.

As CryptoGlobe covered, Congressman Warren Davidson implied during the hearings Facebook’s crypto is a ‘shitcoin’ as it doesn’t have some of the properties bitcoin has. The Congressman made it clear bitcoin has no central authority that can censor transactions or dilute its value, while Libra has the Libbra Association.