Blockchain Platform Set for Launch – Hong Kong
(17 July 2018 - Hong Kong) The Hong Kong Monetary Authority (HKMA) is set to release a trade finance platform based on blockchain’s distributed ledger technology (DLT) in a joint initiative with BOC Hong Kong Holdings, Hang Seng Bank, Bank of East Asia, ANZ Banking Group and DBS Group in September.
The platform will be one of the largest examples globally of a government-led, cross-bank effort to reform the multi-billion dollar trade finance sector using the distributed ledger technology that underpins digital currencies such as bitcoin. It will also be the first dedicated platform for commercial use. Exporters, importers, banks, logistics companies, customs regulators and other parties can tap it to digitize paper documents and automate processes. The aim is to reduce risk and increase the financing capability of the banking industry.
There is a strong groundswell of demand for trade finance that the current paper-based and manual platforms have been unable to meet. Last year, the Asian Development Bank reported that banks and other financial institutions were unable or unwilling to service up to US$1.5 trillion in corporate requests for trade finance, highlighting the considerable trade finance ‘gap’ afflicting the sector. Many other trade finance platforms are in the pilot stage. Seven banks in India are testing India Trade Connect, a blockchain-based trade finance network developed by IT firm Infosys. The Digital Trade Chain project aims to connect trade finance parties in 11 European countries. The Marco Polo project spearheaded by blockchain consortium R3 and trade finance firm TradeIX is collaborating with global banks, credit insurers and logistics companies to test risk mitigation through matching trade data, payables finance and receivables finance in the provision of payment commitments.
Other initiatives include the Batavia Platform being developed by IBM and five global banks, HSBC Trade Finance Platform and the ICICI Trade Finance Blockchain Platform. Most of the initiatives focus on digitalization, automation and posting of transactions on electronic ledgers that are hosted by a network of servers around the world, a system that aims to be inhospitable to fraud. Some of the pilot projects are going beyond these basics and exploring smart contracts, in which payments are automatically made if certain conditions are met. “The next major milestone is to link up with other trade platforms in other jurisdictions to further facilitate cross-border trades.” said HKMA deputy chief executive Howard Lee.
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