The quest for a paper-free trade finance world has moved a step closer with the completion by BNP Paribas and HSBC of a fully digitised end-to-end letter of credit transaction between two different companies.
The transaction involved Rio Tinto selling a bulk shipment of iron ore originating from Australia to China for its customer Cargill. As part of the transaction, BNP Paribas issued a Letter of Credit (LC) over a distributed ledger on behalf of Cargill to HSBC Singapore acting on behalf of Rio Tinto.
The initiative is part of the groundbreaking work being conducted by the Voltron collective of banks, who are working with R3 and Bolero to build a blockchain-based network for automating Letters of Credit and trade finance documentation
In this latest step, both BNP Paribas and HSBC enabled an end-to-end transfer of electronic Bill of Lading (eBL) over traded goods using a digital LC by integrating the Voltron trade finance solution (through R3’s Corda blockchain platform in the back-end) with Bolero’s eBL system.
The LC issuance was completed in less than two hours compared with 1-2 days for traditional, paperbased LCs and, significantly, involved more counterparties than in previous trial runs.
Iain Morrison, HSBC Singapore head of global trade and receivables says: “The transaction represents a significant advancement of this solution since our first transaction earlier this year, which further validates its commercial and operational viability to establish a new era of digital trade. Together with banks and the trade finance industry we will continue to improve this solution by adding new features and functionality as we move towards a commercial launch.”