HSBC has carried out the first yuan-denominated blockchain-based letter of credit transaction. The transaction was completed through a trade finance platform called Voltron. The platform was developed by eight banks including BNP Paribas, Standard Chartered as well as HSBC.
The transaction involving a supplier based in Hong Kong exporting LCD parts and panels to its parent company in Shenzhen was completed within 24 hours through electronic documents. While a transaction through a conventional method would take five to 10 days to be completed.
With regard to the blockchain transaction, Ajay Sharma, HSBC’s regional head of global trade and receivables finance for Asia-Pacific told the media that, “We are hoping that we will have something by end of the year, maybe the first quarter of next year, where will we know from Voltron what it costs, at which point, a lot of banks who might be sitting on the sidelines will be able to make a decision.”
In recent times, many banks including HSBC have been trying to replace the conventional paper-based method of doing finance trade with blockchain or digital ledger technology. The recent transaction is a significant step for HSBC to achieve that goal.
According to reports, trades involving China produced 1.2 million letters of credit worth $750 billion last year. Integrating blockchain to carry out such transactions could save a lot of time and effort.
Recently, HSBC announced that it has selected UK-based Featurespace, a provider of adaptive behavioral analytics technology for fraud and risk management in financial services as its strategic provider. Featurespace will support HSBC’s efforts to strengthen its anti-money laundering and fraud efforts in the insurance and retail sector.