Blockchain technology achieved another milestone this week when a blockchain-based platform, R3’s Corda, was used to facilitate and manage a finance transaction between a US-based company Tricon Energy and an India-based company Reliance Industries (the largest private company in India) with HSBC India being the advising and negotiating bank for Reliance Industries and ING Bank being the issuer of the Letter of Credit on behalf of Tricon Energy.
The shipment from Reliance Industries to Tricon Energy was facilitated and managed through Letter of Credit transaction of the blockchain-based trade platform and electronic bill of landing provider. Unlike the current means of international trade which involves multiple isolated digital systems located across the globe, this blockchain-enabled financial trade system brings all the parties involved into a single platform.
While the current use of paper-based Letter of Credits is considered safe and trustworthy, it is a strenuous process which involves the transfer of physical documents to each party via courier, fax or post. This process could last anywhere from seven to ten days and usually cost tons of cash. The blockchain enabled international trade system, on the other hand, is simpler, faster, safer, and encourages more transparency. As opposed to the traditional 7 to 10 days processing time, this system aids shipments in less than 24 hours.
Commenting on the transaction, the Joint Chief Financial Officer of Reliance Industries, Srikanth Venkatachari, said on behalf of the company that they are excited to partner with HSBC on digitalization of trade finance. He continued by stating how the partnership reflects their commitment to embrace new technologies and industry-first initiatives. CFO Venkatachari added that the blockchain-based international trade system offers significant potential to reduce the ridiculous amount of time involved in the exchange of export documentation from the traditional 7 to 10 days to less than 24 hours.
According to Hitendra Dave of HSBC, the blockchain-based system for international trade is a huge step towards digitizing trade and allows for a greater level of transparency and security as well as being faster and simpler. He also added that this blockchain international trade solution is a significant improvement for organizations that are involved in import and export trade.
Although the Corda system of international trade is a recent development, it has got quite a number of supports already, including but not limited to HSBC, ING, R3, Bangkok, NatWest, and BNP Paribas. These and other supporters have pledged to support and expand the network with the aim of pioneering its adoption across the industry.
It is worth mentioning that India’s Reliance Industries is owned by Mukesh Ambani, the richest person in India and one of the richest people in the entire world.