The other six banks include CTBC Holding, ING, Bangkok Bank, BNP Paribas, SEB and Citi. Last October, Singapore launched its first blockchain-based trade finance platform.
The commercial launch is anticipated during the second half of 2020, after the platform finished in excess of $30 million in letter-of-credit transactions last year during the pilot phase.
“Letters of credit using blockchain have facilitated commercial trades amongst companies, even as the new coronavirus epidemic disrupts trade,” Ajay Sharma, HSBC’s regional head of global trade and receivables finance for Asia-Pacific, told the South China Morning Post.
Sharma added, “Leveraging blockchain for trade finance has overcome the physical constraints we are having today.”
China has widely adopted blockchain-backed trade finance, with roughly 170 Chinese banks having joined the blockchain platform spearheaded by the State Administration of Foreign Exchange to provide trade finance to their clients, according to data from the People’s Bank of China.
In cross-border trade, trust has historically been a critical part of the equation. Corporate buyers must trust that their suppliers will deliver what they promised. Vendors, meanwhile, must trust that their customers will pay on time. And the banks that finance these transactions must trust their business partners.
Of course, participants in the global trading ecosystem won’t simply take each other’s word for it. High volumes of trade documents are key to verifying purchases, payments, deliveries and more – but paper and manual data checks severely hamper transparency and accuracy.
Lee Tarone, CEO and founder of trade finance and payments platform Envoy, says a lack of trust continues to hamper the industry’s ability to address the ongoing $1.5 trillion yearly trade finance gap, with paper as a massive culprit in limiting access to trade finance.