Bangalore, INDIA – In a first for India, British banking major HSBC and ING Bank Brussels have executed a trade finance transaction on the blockchain. The blockchain-enabled letter of credit (LC) transaction facilitated a shipment between Reliance Industries Limited (RIL) and the US-based Tricon Energy, a joint statement issued by HSBC India and Reliance said.
“The use of blockchain offers significant potential to reduce the timelines involved in exchange of export documentation from the extant seven-ten days to less than a day.” -RIL joint chief financial officer Srikanth Venkatachari
ING Bank issued the LC for Tricon Energy and HSBC India was the advising and negotiating bank for Reliance Industries. Currently, physical copies of LCs are sent to each party in the transaction by means such as post or fax. A spokesperson for HSBC India has said blockchain powered transactions cut down on time and the cost involved in processing paper documents which often slows down trade. The use of blockchain offers significant potential to reduce the time involved in exchange of export documentation from seven to ten days to less than a day.
“This transaction validates the commercial and operational viability of blockchain as an alternative to conventional exchanges for paper-based documentation.” – HSBC India
The end-to-end transaction was executed on R3’s Corda blockchain platform. According to HSBC, the Corda application is currently supported by it and five other banks globally to push for industry adoption of the technology.
Some domestic financial institutions including ICICI Bank, SBI and Yes Bank among others are currently dipping their toes in blockchain solutions in finance as “one of the best use cases” for the blockchain due to the possibility of cutting down time and costs.