After applying the blockchain to delivery and liquidation, the next area of interest is trade finance, mainly because trade finance is an area of inefficiency and fraud. Bills of lading and letters of credit are the old ways of managing the delivery of goods and services, and the potential to replace paper-based processes with digital operations in blockchain has become popular in the past few months.
Barclays Bank published a white paper on the topic of trade finance, which highlighted a clear theme:
Decentralized ledger technology – commonly known as a blockchain – caught its attention in early 2014, and banks are now catching up with this trend and further researching this trend. The way in which blockchain reforms exchange value is just like the way Internet communications reform information and information exchange.
There are two main aspects of this technology: the rise of new opportunities and the extent of cost savings. This technology provides a conduit for media transactions, eliminating central trusts or intermediaries and avoiding the risk of double fees. The tamper-proof nature of the blockchain eliminates the possibility of fraud. By providing transparency and immutability, this technology can address operational risks and therefore significantly reduce the operating costs incurred by banks in implementing trade finance controls.
Why is the blockchain important for trade finance?
The positive nature of blockchain technology should address the important challenges facing trade finance, such as:
Transaction transparency and the ability to build consensus will help reduce the risk of document fraud that trade finances face for a long time and expect to reduce the cost of transaction negotiation between counterparties and banks or within banks. The traceability of the blockchain should be able to provide product validation and authenticity proof in the supply chain
The inherent invariance and digital nature of this technology can also provide a secure exchange of values and provide solutions to the issue of credit guarantees in trade finance.
The challenge of maintaining Chinese walls and information privacy among counterparties in trade finance can be overcome by the form of encryption, which is the subject of the transaction so that the subject of the transaction can only access the information that is allowed to be obtained.
See the original Chris Skinner report on his personal blog: