HSBC claims to have piloted the world’s first trade finance transaction using blockchain


Banking and financial services giant HSBC on Monday claimed it had performed the world’s first blockchain-based commercially practical trade finance transaction.

HSBC issued a letter of credit for US-based food and agriculture company, Cargill. The trade finance transaction involved a bulk shipment of soybeans to Malaysia from Argentina. HSBC issued the letter of credit to Dutch lender ING.

In the banking and finance industry, letters of credit are issued as a guarantee that a payment will be received by a seller under certain conditions. This process would normally take a large amount of time, countless paper records, and a lot of back and forth between the parties involved. This is all about to change thanks to Blockchain technology.

Blockchain, the underlying technology that powers cryptocurrencies like bitcoin, allows transactions to be recorded across a huge network of computers. In the case of cryptocurrencies like bitcoin, blockchain records all transactions that occur on the network, thereby creating a public ledger.

Banks have considered the principles behind blockchain—such as creating a decentralized ledger—and tried to apply it to the processes they are doing.

In this case, HSBC used a platform created by blockchain startup R3 called Corda. R3 works together with a group of banks to create blockchain solutions to a variety of problems.

“The need for paper reconciliation is removed because all parties are linked on the platform and updates are instantaneous,” Vivek Ramachandran, HSBC’s head of growth and innovation, said in a statement. “The quick turnaround could mean unlocking liquidity for businesses,” he added.

According to representatives of both HSBC and ING, the exchange was performed in 24 hours, unlike the usual 5 to 10 days it normally takes for such exchanges to be completed via a paper-based system.

Advocates of blockchain claims the technology has the potential to overturn various industries. The trade finance, healthcare and insurance sectors are considered potential targets for the use of the technology since they depend largely on long paper trails.

Although there have been proof-of-concept transactions done using blockchain, the one done by HSBC is the first with potential commercial applications.

Banks have been investing a lot of money into blockchain projects as it is predicted that the technology would disrupt the financial services significantly.

Although banks are not fond of the original use-case for blockchain, which is to underpin crypto-based transactions, many foresee practical use for the technology due to its ability to handle large amounts of data within a transparent, immutable network.


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