Trade Finance Blockchain Adoption Not Without Challenges
(4 August 2022 – Global) Recent high profile blockchain trade finance platform failures highlight the challenges that distributed ledger technology (DLT) based solutions face for trade finance.
Paul Golden reporting for Euromoney states that in 2018, the World Trade Organisation (WTO) asked “can blockchain revolutionise international trade?” The council reported possible applications of blockchain and stated that the technology opened interesting opportunities to enhance the efficiency of several processes and cut costs in these areas.
The report asserted that if the projects under development succeeded, DLT could become the future of trade infrastructure and the biggest disruptor to the shipping industry and to international trade since the invention of the container. One of the highest profile ventures in the space was we.trade, which started offering commercial services in 2019. A joint venture (JV) company owned by 12 European banks and IBM, it promised to enhance cash flow by digitising paper-based processes.
Blockchain enabled trade finance platform “Contour” won significant support in 2021 from Citi, SMBC and seven inaugural Voltron Letter of Credit (LC) consortium members including BNP Paribas, Bangkok Bank, CTBC, HSBC, ING, SEB, and Standard Chartered.
However, the platform struggled to deliver a return on investment for its backers. Even financial support from IBM and a new capital round were not enough to prevent it collapsing this year. Just a few weeks later, B2B online trade platform Serai also admitted defeat in its efforts to build a commercially viable business along with HSBC’s B2B trade finance platform for SMEs.
“It is interesting to see a shift away from blockchain for some trade finance-related initiatives, especially since blockchain was positioned as the key differentiator for their solution” commented Bolero International Global Head of Sales, Jacco De Jong.
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