Seven banks in Hong Kong have collaborated with the region’s financial watchdog to create a trade finance platform run on blockchain technology.
Trade finance means money supplied by a third party to a transaction to help that transaction happen. Examples include money lending, extensions of credit and insurance – services usually provided by banks.
According to Reuters, trade finance is a largely paper-based industry ripe for modernisation. Furthermore, a recent survey conduct by the Asian Development Bank found that $1.5 trillion worth of trade finance requests are not met, and 40 percent of this comes from the Asia-Pacific region.
The new project, which has not yet been named, is intended to modernise the industry. Howard Lee, deputy chief executive of the Hong Kong Monetary Authority, cited benefits such as risk reduction and an increase in the financing capability of the banking industry. He added that the plan is to “link up” with similar platforms in other jurisdictions to create a wider network.
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Said Lee: “This trade finance platform is the first large-scale multi-bank blockchain project in Hong Kong arising from the fruitful results of one of the HKMA’s POC works on trade finance in 2017. I feel really excited about the development as it clearly demonstrates the HKMA’s commitment in facilitating and driving the adoption of new and advanced technologies in Hong Kong.”
The banks involved in the project are HSBC Holdings, Standard Chartered, BOC Hong Kong Holdings, Hang Seng Bank, Bank of East Asia, Australia and New Zealand Banking Group, and DBS Group Holdings (of Singapore).
The technology was provided by Ping An Insurance Group, and the platform will be built on Hyperledger Fabric 1.1.
Hyperledger is a collaborative project promoting the adoption of open source blockchain technology. It was created by Linux and counts more than 200 companies worldwide as members. Fabric is a blockchain which can hide confidential information. It has been used by a group of major European banks to develop a cross-border trading system. This system was tested in July 2018.
The planned launch date of the service in September 2018.