HSBC – a leading London-based bank along with ING Bank NV, experimented with Blockchain for handling a letter of credit for Cargill Inc. The letter of credit backed a soybean shipment that traveled from Argentina to Malaysia. This end-to-end transaction between the buyer and seller banks was completed on the shared ledger platform instead of multiple systems.
With the use of distributed ledger technology, the need for paper-based resolution is eliminated as all the parties are connected on the platform and can thus receive instant updates. In other words, Blockchain helps in reorganizing the traditional paper-based manual process in trade finance, which usually requires five to 10 days for exchanging. In this case, the transaction was accomplished within twenty-four hours.
The Cargill transaction turned out to be the first live trade finance transaction leveraging the shared ledger technology and turned out to be an inflection point as to how trade finance is conducted.
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