Despite their general hostility towards cryptocurrency industry, a growing number of banks have started embracing its underlying technology—the blockchain.
On Monday, financial services giant HSBC announced that for the first time in history, a trade finance transaction has been completed on the blockchain. Such a transaction, which usually takes around a week to complete with paper-based processing, was finalized within a few hours on the blockchain, according to HSBC.
This was the first time that a blockchain was used for a trade finance settlement. According to a CNBC report, the U.S. food and agriculture firm Cargill made use of the trade finance transaction, which was essentially a letter of credit, to cover the shipment of bulk soybeans to Malaysia from Argentina. The letter of credit was issued by Netherlands-based financier ING.
HSBC revealed its enthusiasm for the development as blockchain continues to gain traction as well as support from the public and private sector in major official markets such as China and the United States. According to the financial services group, “The quick turnaround could mean unlocking liquidity for businesses.”
Blockchain is definitely a technology which can be used to improve transparency as well as cutting down on paper trails. This reduces lead times for complex and time-consuming processes such as the issue of a letter of credit. These are a form of guarantee by banks that payment for a particular transaction will be received.
Experts have said that with blockchain being heavily decentralised, various parties are linked by computers accessing the same network, resulting in a digital ledger that could prove to be very useful for the banking sector. HSBC is reportedly using the Corda blockchain platform.
Poland is among the countries leading the way in finance and banking through the application of blockchain technology to store banking records on such applications. Polish tech company Billon recently confirmed that it would be implementing “blockchain for storage and secure access to sensitive customer information” for the country’s banking industry.
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