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HSBC Holdings Plc. has entered into a commercial finance agreement using a blockchain for an export from Reliance Industries Ltd to Tricon Energy, based in the United States, which marks the first payment of blockchain abroad by India. Mint explains what it means for the payment ecosystem.
Why was the blockchain used in a commercial finance agreement?
In the case of Reliance Industries, the letter of credit (LC) was issued by ING Bank for Tricon Energy USA, the importer. HSBC India was the consulting and trading bank for Reliance Industries. In LC-based commercial finance operations, physical documents must be validated by multiple parts of different countries, making it a time-consuming (5-10 days) affair. With blockchain, the data can be separated and the whole process can be completed within, say, 24 hours and transparently, with the process status visible to all parties.
How was blockchain adopted for these transactions?
In March, HSBC and ING Bank signed a live commercial finance agreement for Cargill using the scalable blockchain platform R & D of Rcha company R3 and the help of the CryptoBLK technology service provider. The exchange was done in 24 hours, HSBC said. On September 23, SBI Ripple Asia said that a Japanese consortium of 15 banks will use Ripple's blockchain payment and settlement technology. On October 24, the Commonwealth Bank of Australia, Wells Fargo, Brighann Cotton undertook an operation that involved the transportation of cotton from Texas to Qingdao using a ledger distributed to all parties.
How many banks are there on a blockchain?
JP Morgan has announced the expansion of its Interbank Information Network to include over 75 banks. Banks in India have formed a "Bankchain" alliance to explore blockchain-based solutions.
Can the blockchain be used for remittances?
Remittance transactions cost a small fortune because they involve third parties. Blockchain solutions can reduce transaction costs and make the process faster. Platforms specialized in remittances such as Bitspark and BitPesa use block-chain technology to send money across borders. TransferGo Now allows Indian customers to make instant money transfers to India from Europe using Ripple's blockchain technology, which claims to be faster than the company's payment system for global interbank financial telecommunications.
What did the RBI say?
Although RBI said that banks could create a "private blockchain for their internal purposes", there are security concerns. First, the chain of blocks should not be positioned as a cure for all bank ills. Secondly, a June McAfee report warns against over-reliance on blockchain implementation. Thirdly, most of these implementations are authorized (private). In a blockchain without permission as bitcoins, anyone can configure a node and join the network. The question, then, is: an authorized blockchain qualifies as a real blockchain implementation?
