HSBC said it has performed the world’s first trade finance transaction using blockchain technology.
Here’s what happened: HSBC issued a letter of credit for U.S. Food and agriculture firm Cargill to Dutch lender ING. The trade finance transaction involved a shipment of soybeans from Argentina to Malaysia.
Using blockchain technology, this letter is stored on an open, distributed ledger where every transaction is visible to anyone with access to the system. This eliminates the need for paper reconciliation and a long chain of digital (and paper) communication between the two parties. HSBC and ING said the exchange was performed in 24 hours, whereas it normally takes five to 10 days for such a transaction to go through traditional methods.
HSBC used the “Corda” platform, which was developed by blockchain company R3. The startup works with a consortium of more than 200 banks, clearing houses, exchanges, and market infrastructure providers to develop commercial applications of distributed ledger technology.
And HSBC isn’t alone in exploring the uses for the burgeoning technology.
Santander last month launched a foreign exchange service that uses the distributed ledger tech to make same-day international money transfers. J.P. Morgan recently applied for a patent to facilitate payments between banks using the blockchain.