Reliance Industries Limited, the oil and gas conglomerate owned by the richest person of India, Mukesh Ambani – has utilized blockchain to conduct its first trade finance transaction.
Financial services and banking major HSBC and Reliance Industries Ltd on Sunday gave a statement that they have executed a first-of-its-kind blockchain trade finance transaction, validating the operational and commercial feasibility of blockchain as a substitute to conventional exchanges for paper-based documentation.
They released a joint statement mentioning that this is an industry-first as the blockchain platform integrated with ‘Bolero’s electronic Bill of Lading’ platform to issue and manage an electronic ‘Bill of Lading’. The statement further added that this allowed a digital transfer of the title of goods from the seller to the buyer in the underlying trade. It further allowed the underlying trade to be fully digitized.
As per the news release from HSBC India shared with CoinAdvice, RIL has recently executed a live blockchain-powered trade finance transaction in collaboration with US-based global chemical distributor Tricon Energy. Notably, the end-to-end transaction was facilitated by banking majors HSBC India and ING Bank, Brussels. The release further adds that the transaction was carried out on enterprise consortium R3’s Corda blockchain platform.
The Corda platform was integrated with a platform provided by Bolero International, a U.K.-based trade finance digitization firm. Furthermore, the platform was used to issue and manage an electronic bill of lading.
The release explains that a letter of credit was issued, using the blockchain platform by ING Bank for Tricon Energy USA (the importer) with HSBC India as the advising and negotiating bank for RIL (the exporter). It is to be noted that a letter of credit is a bank guarantee for a buyer’s payment to a seller.
Hitendra Dave, HSBC India’s head for global banking & markets said that the use of blockchain is a significant step in the direction of digitizing trade. He added that the overall efficiency it brings to trade finance ensures quicker turnaround, cost-effectiveness, and potentially unlocks liquidity for businesses.
Importers and exporters, presently use paper-based letters of credit to underpin transactions, with each party sending documents either by fax or post. This manual process not only slows the pace of trade but also increases the costs.
On the other hand, the blockchain-powered trade finance platform is aimed to digitize that process, thus saving cost as well as time.
Srikanth Venkatachari, the joint chief financial officer at RIL said that the use of blockchain offers the noteworthy potential to minimize the timelines involved in an exchange of export documentation from the existent 7 to 10 days to less than a day.