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A blockchain-backed trade finance platform is getting ready to be launched by the Hong Kong Monetary Authority and partners. The system currently stands as one of the largest examples of a government-backed effort to tackle issues in the worldwide trade finance industry.

Those who work in the trade finance sector often sift through lots of paperwork to verify transactions and ensure credentials are valid. Now, a new blockchain-based platform is being launched in the coming months to help reform the industry by digitizing documents and automating processes so the banking industry can be protected against fraud and risk.

The project is a joint effort by the Hong Kong Monetary Authority (HKMA) and a collection of banks, including HSBC, Bank of East Asia Ltd, and Standard Chartered.

A growing number of banks, governments, and technology firms have turned their eyes to blockchain when it comes to trade finance — one of the main reasons being that people are still looking for a way to unlock liquidity in the supply chain. A study from Ernst & Young said 2,000 leading companies in Europe and the United States have about $1.3 trillion dollars tied up unnecessarily.

The World Trade Organization said in a report how unmet demand for trade finance totals $700 billion dollars across developing Asia and $120 billion in Africa. The agency says bridging these types of gaps would “unlock the trading potential of many thousands of individuals and small businesses around the world.”

The reasons for the lack of liquidity are multifaceted, but some of the biggest barriers have been identified as high transaction costs, physical paper trails that slow down processes, and general complexity when it comes to accounting.

The blockchain is being heralded as a solution to many of the aforementioned issues — primarily because it could be used to eliminate physical paperwork, vastly cut down on transaction times, and make it easier to catch fraud, since parties can view logged trades in the blockchain.

Banking giant HSBC said in May how it was able to execute the globe’s first commercially viable blockchain trade finance transaction on the Corda platform, which was developed by the R3 blockchain consortium. Entities like Deutsche Bank and Rabobank have also teamed up to launch a trade finance platform.

However, the project in Hong Kong is one of the first to go live with government backing. The system was designed by Ping An Group and will be owned by the banks — who are teaming up with the financial regulator.

One key feature of the platform is the ability to cheaply extract company data so potential customers can be reviewed — which is said to make it easier for small businesses to have access to trade and supply-chain finance.

Officials involved with the project also have plans for the future. HKMA deputy chief executive Howard Lee said the next step of the project “is to link up with other trade platforms in other jurisdictions to further facilitate cross-border trades.”

What are your thoughts on the new blockchain trade finance platform? Let us know in the comments below! 

Images courtesy of Shutterstock, Wikipedia Commons.

The post Blockchain Trade Finance Platform Set to Launch In Hong Kong appeared first on Bitcoinist.com.

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