According to HSBC, the bank completed its first blockchain-based letter of credit transaction, using Chinese renminbi. The operation took place between Hong Kong and Shenzhen.
Digital ledger technology has attracted the interest of many banks and other financial institutions for the need of streamline of traditional financing trade.
As the first yuan-denominated blockchain-based letter of credit transaction accomplished, the next step has already been taken, including the Voltron trade finance platform. More specifically, the Voltron platform has developed by eight banks; including the BNP Paribas, HSBC, and Standard Chartered.
In more details, the technology decreased the processing time for the deal to 24 hours from what usually takes five to 1o days. The transaction involved Hong Kong’s MTC Electronics sending LCD parts to its parent company in Shenzhen.
The transactions have been used for the platform so far are just part of individual pilot studies. However, as Ajay Sharma(regional head of global trade and receivables finance for Asia-Pacific) stated, the progress was made is tremendous, and it could be commercially accepted as a model for banks.
“We are hoping that we will have something by the 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,” he said.
“We are hoping that through this technology, the unit cost of doing a transaction comes down, along with other benefits, such as speed.”
Ultimately, the above deal works as a milestone in HSBC’s plan to pave the way in automating China’s largely paper-based finance industry using digital ledger technology.