HSBC adopts blockchain in trade finance deal, claims ‘industry first’
16 May 2018

HSBC has completed a live trade finance transaction using a blockchain platform, a development it said is an ‘industry first.’

The blockchain-based transaction involved a bulk shipment of soyabeans from Argentina to Malaysia, moved through commodity trader Cargill’s Swiss unit and its Singapore subsidiary.

A letter of credit was issued, using Corda blockchain platform, by HSBC to ING bank, and was completed on a single shared application rather than multiple systems. Both banks represented Cargill.

A HSBC spokesman said: “There have been previous Proofs of Concept (PoC) transactions and earlier pilots over the last 12-18 months, but this transaction is unique in so far as it was a real transaction for a real client concerning a real shipment of goods.

“It was the first Letter of Credit transaction completed on R3’s Coda, the first completed on scalable technology and the first real transaction by HSBC.”

Conventional exchanges for paper-based documentation related to letters of credit usually take between 5-10 days. This exchange was done in 24 hours, a statement from the bank explained.

“The use of blockchain technology in the banking industry is expected to reduce the risk of fraud in letters of credit (LoC) and other transactions as well as cut down on the number of steps used,” Reuters said.

David E. Rutter, CEO of R3, the firm behind the Corda scalable blockchain used, said his company is looking to work with the industry to make enterprise blockchain a reality in trade finance.

“Corda enables the development of applications like this one that bring all parties together on a single, shared infrastructure while ensuring the highest levels of privacy and security.”

R3 and a group of 12 banks supporting the Corda application are looking to grow the network on an open basis to drive adoption across the industry, the statement explained.

Read more:

Analysis: The ‘stunning’ Criminal Finances Act, HSBC and the billion dollar fraud

Barclays in 2018: Something to smile about — regulators, revival and compliance goals

Confessions of a compliance officer: Do you trust overseas colleagues’ KYC work? Guess what …

You can claim CPD minutes for reading this article, by signing up to our CPD Wallet

FREE CPD Wallet
Must Read

Pursuing unexplained wealth in Nigeria: It’s time to take on the enablers

Despite the efforts of the incumbent President to fight corruption, Nigeria remains one of the countries that constantly top the world’s corruption rankings. According to  Transparency International’s 2017 Corruption Perception Index, Nigeria is one of the most corrupt countries in the world, ranking number 148 out of 180 countries covered… Read More

The perfect AML programme: A ten point guide

Does the ‘perfect’ path to anti-money laundering (AML) exist? The quest for the perfect plan can be traced back to criminals causing immeasurable damage for many economies through money laundering. In response, governments are continuously trying to fight back, issuing a raft of rules and penalties for financial institution (FIs)… Read More