Monday, May 14, 2018

Blockchain has now evolved to where it is ready to be integrated into the $9 trillion global trading system

When one mentions the Blockchain, nearly everyone automatically responds with comments about Bitcoin or some other cryptocurrency.  However the Distributed Ledger that is the Blockchain is so much more than simply the myriad of virtual currencies that have sprung up since 2009.  And on May 13, the public's perception of the Blockchain may have just been changed forever.

This is because HSBC conducted the first use of the Blockchain to complete a trade agreement between agricultural giant Cargill and another party, and it now opens up the Blockchain to potentially become the standard in the world's $9 trillion annual trade system.

Just a few hours after German online bank Bitbond announced it now allows users to transfer loan anywhere in the world using bitcoin and other cryptos , a move which we said would result in a rapid adoption of blockchain technologies within the bank-disintermediation space, the FT reported that in a somewhat parallel transaction, UK-based banking giant HSBC has completed the world’s first commercially viable trade-finance transaction using blockchain, in the process opening the door to mass adoption of the technology in the $9tn market for trade finance, a process which ironically culminates with traditional banks such as HSBC becoming disintermediated from the fund flows process, i.e., obsolete. 
HSBC said the blockchain trade, which processed a letter of credit for US food and agricultural group Cargill, had shown the platform was ready to be commercially adopted across the industry. 
In many ways the news will be welcome, especially when it comes to trade finance: traditionally one of the most convoluted and burdensome pillars of modern finance, one which has been deeply in need of disruption. 
As a result, the FT notes that the introduction of blockchain "is expected to shake up the centuries-old trade-finance industry, reducing the numerous documents and several days of processing needed for a single transaction to a paperless task that can be completed in hours." - Zerohedge


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