The Bangladesh arm of HSBC, one of the world’s largest banks, has completed the country’s first cross-border blockchain trade finance transaction.
According to a press release on Tuesday, the digitized letter of credit (LC) transaction brought a notable reduction in the processing time compared to traditional methods – down from the average of five to 10 days to under 24 hours. The move signifies an important step for Bangladeshi companies in the digitalization of trade, the bank said.
The maiden transaction related to the import of 20,000 tonnes of fuel oil from Singapore by United Mymensingh Power Ltd. for a power station. It was carried out over the trade finance network Contour, built with R3’s Corda Enterprise blockchain technology.
Aimed to facilitate trade, a letter of credit is a financial guarantee from a bank overseeing a transaction between two parties. In the event one party is not able to honor their agreement, the bank steps in to cover the costs and complete the transaction.
“I believe this will usher in a new era of routing international trade transactions as businesses and governments recognize transparency, security and swiftness in performing tasks using blockchain technology,” said Md Mahbub ur Rahman, CEO of HSBC Bangladesh.
Contour’s first successful LC transaction was conducted between two major petrochemical companies, also in the Asia region, in August 2019, when the platform was known as Voltron. Earlier this year, Standard Chartered claimed the first yuan-based blockchain LC transaction between mining giant Rio Tinto and Chinese steelmaker Baosteel.
HSBC ranks sixth amongst the world’s largest banks and has more than $2.7 trillion total assets under management, according to an S&P Global Market Intelligence 2020 report.