Hong Kong Monetary Authority (HKMA) and seven banks are in a partnership to launch a blockchain-based finance platform in September.
The seven banks, including Standard Chartered PLC and HSBC Holdings PLC, will jointly work with the regulator to create one of the largest government and cross-bank initiated platform.
The platform will improve the multi-billion dollar trade finance sector using the blockchain which underpins cryptocurrencies such as bitcoin.
As one of the most paper-based and manual parts of the financial sector, blockchain technology will digitise and automate trade finance. According to deputy chief executive HKMA Howard Lee, the project will involve digitising documents and automating processes to decrease risk and boost the financing capability of the banking industry.
“The next major milestone […] is to link up with other trade platforms in other jurisdictions to further facilitate cross-border trades,” he said in a joint statement with the participating banks.
The other five banks include BOC Hong Kong Holdings Ltd, Hang Seng Bank Ltd, Bank of East Asia Ltd, Australia and New Zealand Banking Group Ltd, and Singapore’s DBS Group Holdings Ltd.
Ping An Insurance Group Co of China Ltd will provide the technology for the project.
Improving Trade Finance with Blockchain Technology
The Asian Development Bank’s 2017 survey discovered that the trade finance gap in the world – the amount of unmet demand for trade finance – was $1.5 trillion with 40 per cent of the amount coming from the Asia-Pacific region.
Players in this sector hope emerging technologies such as the blockchain will enable them to cater to more customers while serving the existing ones more effectively.
In May, financial services companies HSBC and ING Groep NV carried out the world’s first trade finance transaction on the blockchain. The transaction was carried out on a platform called Corda, developed by a blockchain consortium in New York.
