HSBC Holdings, the UK headquartered one of the largest financial services organisations in the world, completed a transaction using blockchain, showing that the technology is commercially viable for trade finance. This was called “a major step in boosting efficiency and reducing errors in the multi-trillion-dollar funding of international trade.”
The bank, together with ING Bank, a Dutch bank, handled a letter of credit for Cargill Inc., an American privately held global corporation, relying on the blockchain developed by the R3 consortium. The letter backed a shipment of soybeans transported last week from Argentina to Malaysia.
Vivek Ramachandran, HSBC’s global head of innovation and growth for commercial banking, said in an emailed statement for Bloomberg, “This is an inflection point for how trade is conducted. With blockchain, the need for paper reconciliation is removed because all parties are linked on the platform and updates are instantaneous.”
The process, which usually takes between five and ten days and leaves a long paper trail, was completed in 24 hours in this case.
This is not the first issue of banks looking into blockchain, or even crypto: German online bank Bitbond uses Bitcoin to bypass the Swift international transfer system to lend money across the globe rapidly and at low cost.
Their founder, Radoslav Albrecht, told Reuters TV in an interview, “Traditional money transfers are relatively costly due to currency exchange fees, and can take up to a few days. With Bitbond, payments work independently of where customers are. Via internet it is very, very quick and the fees are low.”
Since the loans are held in Bitcoin for only a few seconds or minutes until they are exchanged into a fiat currency, the danger of the coin’s fluctuations is hardly a cause for worry.