Sealing the Deal: The Rise of Blockchain-Powered Trade Finance Platforms

Global trade has long been viewed as one of the most conspicuous areas for instrumental application of distributed ledger technology, with both trade finance and supply chains relying on antiquated, unreliable systems of record keeping and trust management.

The recent news that Hong Kong's financial regulator and a conglomerate of banks are poised to roll out a blockchain trade finance platform next month is yet another instance of incumbent actors summoning DLT to address the international trade's woes - if not one of the most ambitious to date.

While some reports estimate the whole trade finance market at $9 trillion, a survey by the Asian Development Bank suggests there is an additional $1.5 trillion of unmet demand for such services worldwide.

The bank has to know that the contractor is in possession of the goods it is about to ship and also has to know that these same goods have not already been pledged to another bank - another incarnation of a double-spending problem.

The Hong Kong Monetary Authority and its partner banks are looking to address these deficiencies by introducing a blockchain-powered trade finance solution.

Transparency of trade finance transactions and detailed information on every step of the supply chain will ensure that borrowers ask for the exact amount of resources they need to perform a particular deal, thus eliminating one of the most widespread fraud schemes.

Hong Kong's emerging trade finance solution may be set to grow into the largest of its kind, but it is certainly not the first to draw global attention.

Blockchain-powered trade finance enterprises invariably have the same three letters to them: IBM. The tech giant has heavily invested in its blockchain-as-a-service arm, and now the time seems to have come to reap the fruits that come in a form of B2B blockchain market dominance.

In Europe, a consortium of leading banks - HSBC, Deutsche Bank, UniCredit, Rabobank, KBC, Natixis, Nordea, Santander and Société Générale - is harnessing the IBM's blockchain solutions to put up a platform called We.Trade, which will focus on carrying out trade deals between European SMEs.

Once all the stakeholders digitally sign off on their parts of the deal, they trigger the execution of a smart payment that closes the trade agreement.