HSBC is working on the first letter of credit built on blockchain technology
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Answer HSBC is working on the first letter of credit built on blockchain technology
HSBC has stated that the process of creating a letter of credit based on the Chinese yuan and based on blockchain technology has been completed successfully.
To clarify, the letter of credit is a final guarantee issued by the bank to the exporter that, according to what it has delivered of the goods or services to the importer and according to the agreed terms, the price of the goods and services will be paid.
The letter of credit is also used as a guarantee to the importer that the goods and services ordered will be delivered in accordance with the conditions met.
Accordingly, HSBC, like other financial institutions and banks, seeks to use blockchain technology to reduce and simplify transactions between exporters and suppliers and eliminate paper transactions.
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As the first transaction of its kind, HSBC used the Chinese currency in a letter of credit based on blockchain technology, using the Voltron platform, which was developed by eight banks, including: BNP Paribas, Standard Chartered and HSBC.
HSBC’s transaction is a trial but Ajay Sharma, HSBC’s Regional Head of Trade Finance for Asia Pacific, said the trial would allow us to move forward and create a final commercially acceptable model for banks.
And he said What does it mean:
“Hopefully we will have something by the end of this year or maybe in the first quarter of next year, all with the aim of lowering the cost of doing the transaction through this technology.”
HSBC provided some data and figures on letters of credit running on SWIFT as more than 1.2 million letters of credit in 2018 and in China alone.
HSBC stated that the experiment was completed by exchanging the necessary electronic documents in less than 24 hours, compared to the usual period of five to 10 days.
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