HSBC pilots the first yuan-based Letter of Credit on Voltron blockchain

By Staff Writer

HSBC completed the first yuan-denominated blockchain-based letter of credit transaction on its Voltron trade finance platform, Reuters reported.

Voltron trade finance platform has eight banks as members, including BNP Paribas, Standard Chartered as well as HSBC. It is developed in partnership with Hong Kong-based blockchain consulting firm, CryptoBLK.

These are mainly pilot projects which means progress is being made towards full commercialization of digitized letter of credits seen as revolutionizing the centuries-old trade finance business, Ajay Sharma, HSBC’s regional head of global trade and receivables finance for Asia-Pacific has been quoted as saying.

The latest pilot project involved Hong Kong-based MTC Electronic exporting a shipment of LCD parts and panels to its parent company, Shenzhen MTC, based across the border from Hong Kong.

The digitized documents changed hands within 24 hours, a huge improvement over the typical five to 10 days window usually needed for the exchange of paper-based documents, the bank said.

Blockchain is seen as making the otherwise cumbersome process of issuing L/Cs faster, less prone to fraud, and cheaper. The challenge, however, is in bringing all of the stakeholders in the trade finance food chain onto the platform, which could take time because it involves triggering a shift in the business culture, experts have said.

HSBC said, citing SWIFT data, that 1.2 million letters of credit, documents issued by a bank guaranteeing a buyer’s payment to a seller, worth US$750 billion were issued into and out of China alone in 2018, according to Reuters.

Last week, HSBC became the first bank to complete a financial transaction over the European blockchain platform, WeTrade, Global Trade Review reported.
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