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The Bangladesh branch of HSBC, one of the largest banks in the world, 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 resulted in a significant reduction in processing time compared to traditional methods, going from an average of five to 10 days to less than 24 hours. The move represents an important step for Bangladeshi companies in digitizing commerce, the bank said.
The first transaction involved the import of 20,000 tonnes of fuel oil from Singapore by United Mymensingh Power Ltd. for a power plant. It was carried out via the Contour trade finance network, built on R3’s Corda Enterprise blockchain technology.
With the aim of facilitating trade, a letter of credit is a financial guarantee from a bank that oversees a transaction between two parties. In the event that one of the parties is unable to honor their agreement, the bank intervenes to cover the costs and complete the transaction.
“I believe this will usher in a new era of international business transaction routing as companies and governments recognize transparency, security and speed in executing business 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 Asian region, in August 2019, when the platform was known as Voltron. Earlier this year, Standard Chartered claimed the first yuan-based LC blockchain transaction between mining giant Rio Tinto and Chinese steelmaker Baosteel.
According to a 2020 S&P Global Market Intelligence report, HSBC ranks sixth among the largest banks in the world and has more than $ 2.7 trillion in total assets under management.
