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Although trade finance isn’t quite as ‘glamorous’ as many of the other sectors of the financial industry, the World Trade Organization estimates that 80 to 90 percent of the world relies on some sort of trade finance infrastructure.
Distributed ledger technology (DLT) is often cited as a possible solution for some long-standing trade finance industry woes, and there has been some interest in building a DLT platform that could be adopted industry-wide; among others, IBM has worked on developing a blockchain solution for the trade finance sector.
Recently, Finance Magnates spoke with Dave Sutter, Head of Platform Strategy at TradeIX Limited, about how TradeIX has created a platform that it hopes will be adopted by “a host of different parties within the trade finance ecosystem.” DLT plays an important role in the platform, but as Dave explains, it isn’t everything–for a few important reasons.
The TradeIX Platform (TIX)
TradeIX’s platform, also known as TIX, consists of four main components: applications, the developer, the toolkit composer, and the core; the platform is mainly intended for use by large-scale corporations and financial institutions that are engaged in trade finance activities. However, blockchain is only a part of the platform.
Dave explained that the applications on the TIX platform “are developed by ourselves, and they can also be developed by third parties, as well as our current clients. For example, banks and corporations can build their own apps.” The developer toolkit (which consists of ‘trade finance-specific APIs and microservices’) has been designed to allow integration of the TIX platform into pre-existing systems and external platforms.
“The composer is what we call an ‘orchestration engine’,” said Dave. “What we call trade finance is–by its nature–a very complex ‘dance’ of a lot of different parties, similar to an orchestra. The composer is where all the rules, business, and workflow are managed. It allows users to automate very complex, multi-party finance transactions from a single interface.”
DLT is Important, But Not the Pinnacle
Dave said that the TIX platform is “the convergence of cloud technology, artificial intelligence, open APIs, modular microservice-based infrastructure, along with things like DLT”–which is to say that DLT plays a key role, but it’s just one part of the platform: the Core.
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“Core is the distributed ledger piece,” Dave said. “This is the operating piece for the platform. It provides a very standard, smart technology infrastructure that helps aggregate and standardize data across the platform, as well as connect the platforms and participants that use them through others within the trade finance ecosystem. Core is like the ‘internet of trade’, if you will. It’s an open protocol that allows the real-time trade data of assets between parties within the ecosystems.”
‘No Need’ for a Native Token
However, Core is not a public blockchain; there is no way to buy or trade tokens for the TIX platform. Dave explained that this is because “[TIX is] using DLT purely in an enterprise manner… we are primarily a trade finance company, not a DLT or blockchain company.”
He went on to say that TIX’s interest in distributed ledger technology has much more to do with innovation than with the potential profits and growth associated with ICOs: “We use distributed ledger technology because it’s a very good technical solution. Specific issues that have to this point been unsolvable or intractable within trade finance are now solvable. But DLT and blockchain are just a piece of the overall solution.”
Dave added that regulatory issues could cause a native token and all its accoutrements to be more trouble than its worth: “The reason why we don’t go with the native token is that frankly–there is no use or need for it within the space that we provide solutions. Outside of that, any time you get into the token space you run into some serious regulatory issues.
I think the SEC is gonna start coming down hard on a lot of these ICOs, which are in most cases the sale of unregistered securities. We don’t have a use for it, and if we did it would be, in my opinion, a risky decision on our company’s part just because of some of the regulatory uncertainties.”
What Role Does Blockchain Play For TradeIX, Exactly?
“[TradeIX has] several different implementations of distributed ledger or blockchain-based technologies,” Dave explained. “The one that we focus most of our time and effort on is the Corda protocol, which is offered by R3. It’s the consortium of over 100 financial institutions, regulators, and technology companies.”
TradeIX and R3 are collaborating on several different projects. “The primary one that’s public is called project Marco Polo. This is a consortium of twenty financial institutions that’s focused on the creation of a new technology infrastructure for trade finance. In the first phase, it’s really focused on open account trade–so, receivables finance, supply chain finance, and derivatives thereof.
The consortium is really a collaborative project between all these financial institutions. There are several different work streams within the project. It kicked off at the end of Q3 last year, and we just successfully completed our first proof-of-concept with the twenty banks, and we’re now moving into the pilot phase with all of them.”
Dave also expressed his hopes for TradeIX’s expansion outside of trade finance in the future: “We’ll start to see that developer community coalesce, and people will start to begin building solutions across the platform that address other industries.”