After the 2008 financial crisis leading economy experts understood that the financial field is in the need of a major overhaul. At that particular time, it was not yet known how exactly this overhaul will be done. Meanwhile, the person named Satoshi Nakamoto was launching a breakthrough digital currency bitcoin, which was supported by an innovative distributed ledger called blockchain. There was a small number of people at that time that thought blockchain will be the answer to rising financial industry problems. Ten years later it is clear that blockchain technology is making the financial system much more secure, organized and cheaper than before. We are living in a decade of amazing blockchain-based innovative fintech projects and we only scratched the surface of the possible use of blockchain technology.
In this market outlook, it does not come as a surprise that seven Hong Kong banks in a joint effort are launching blockchain-based trade finance platform, as Reuters reports.
Blockchain-based Trade Finance Platform
Trade finance sector is one of the most paper-oriented and generally manual sectors of the financial services industry. That being said, blockchain technology will completely change the sector with its powerful distributed ledger. New trade platform will be one of the largest government-led reform in the finance sector. The government will team up with seven banks in order to create the platform and make use of blockchain technology in the sector. It is expected that the platform will be launched in the upcoming months.
Deputy chief executive of the Hong Kong Monetary Authority (HKMA) and Honk Kong’s de facto central bank and banking regulator Howard Lee said that the goal of this project is to automate processes and digitize documents. This will be done in order to reduce risks and increase the financing capability of the banking industry as a whole. Blockchain will massively help in reducing frauds and other malicious attempts. He added that the next goal will be linking with other trade platforms in a different jurisdiction in order to create and further facilitate cross-border trades. One of the key features of the platform will be the ability to extract company data in a cheap manner in order for customer review. This will make access to trade and supply-chain finance much easier for small businesses.
Market participants are hoping that the blockchain and other fintech technologies will enable them to serve more clients in a more effective way than before.
One of the biggest issues in trading is the growing lack of liquidity. People are still looking for a way to unlock liquidity in the supply chain and propel the trading potential of many thousands. They are hoping that the blockchain technology is the way to do that. Some of the biggest barriers to the lack of liquidity are physical paperwork and high transaction costs. Blockchain will enable much faster work with less paper-work which will massively reduce the complexity of the system in itself. Also, cheaper transaction costs will be possible to achieve with the distributed ledger.
This is one of the first projects of its kind in the world and the expected success of the project will only propel blockchain technology to the different fields of possible use.
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