Global investment banks ING and Societe Generale have joined forces with Mercuria, a commodity trading house, to harness the power of blockchain technology for live oil trading capabilities, part of the technology’s latest testing into commercial trading.
As opposed to other asset classes, commodity trading and finance are still mainly reliant on physical paper documents, which must routinely traverse the globe for execution and settlement. Such draconian measures in 2017 represent a fine opportunity for blockchain technology to overhaul the sector, with a wide range of potential gains and streamlined measures potentially being deployed.
In particular, a recent experiment conducted by the groups found that by making efficiency gains in certain processes, the average total time for a given bank to complete its role in the transaction could be cut from approximately three hours to just twenty-five minutes.
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The application of distributed ledger technology to the commodity trade financing chain is important as it could potentially curtail several prevalent issues such as documentary fraud – the technology also can allow for the digitalization of assets.
According to Patrick Arnaud, Managing Director, Trade and Commodity Finance at ING, in a statement on the partnership: “The commodity finance industry is hampered by nature by inefficiencies and outdated procedures. By applying blockchain technology, we expect that we can eliminate a lot of these, making the overall process faster and more cost effective and the tests we have been able to carry out have proved this.”
“The Easy Trading Connect platform allowed real-time access to information for all parties, eliminating the need for an acknowledgment process. It also keeps a full data record, which is useful for auditing and as well as having an intuitive navigation system and a well thought through design,” noted Federico Turegano, Global Head, Natural Resources and Infrastructure, Societe Generale Corporate & Investment Banking.