HSBC executes country’s first cross-border blockchain LC transaction
HSBC Bangladesh has executed the first-ever cross-border blockchain letter of credit transaction in Bangladesh, in a development that could reduce LC processing time from the typical 5-10 days to under a day.
The first transaction involved the import of 20,000 tonnes of fuel oil by United Mymensingh Power Ltd from Singapore for its power plant.
This is the first-time a cross-border blockchain transaction has been executed in Bangladesh, the lender said in a statement yesterday.
The transaction was completed beneath the Contour platform which is built using R3's Corda blockchain technology, connecting a global network of banks, corporates and digital solutions.
A blockchain is a database that is shared across a network of computers. Once an archive has been put into the chain it is very difficult to change. To make sure all of the copies of the database are the same, the network makes continuous checks, according to Reuters.
Blockchains have been used to underpin cyber-currencies like bitcoin but a great many other possible uses in areas such as for example banking and supply chain are emerging.
"This showcases our strong commitment and capability to support cross-border trade by Bangladeshi businesses using cutting-edge technology platforms," said Md Mahbub ur Rahman, ceo of HSBC Bangladesh.
"I really believe this will usher in a fresh era of routing international trade transactions as businesses and governments recognise transparency, security and swiftness in performing tasks using blockchain technology."
"I am happy that HSBC has pioneered Bangladesh's first-ever cross-border blockchain LC transaction," he added.
This marks a significant step for Bangladeshi companies in the digitalisation of trade. It creates conducting business simpler and faster by reducing transaction times and boosts working capital efficiency, something that's especially attractive to local companies navigating through the existing economic challenges, the statement added.
"We are very enthusiastic about the usage of blockchain technology for our imports. We recognize that we are headed towards a digital era and we are ready to evolve inside our effort to adjust to the changes," said Moinuddin Hasan Rashid, group chairman and managing director of United Group.
Fuel oil LCs are highly time-sensitive where every second counts and United Group believes the blockchain technology can help manage time proficiently and ensure increased efficiency and better cost management, he said.
For the first half of 2020, Bangladesh's trade under LCs was more than $34 billion, based on the SWIFT, a global provider of secure financial messaging services.
"So, the potential efficiencies for domestic companies are tremendous," the lender said.
HSBC has pioneered blockchain platform in countries such as for example India, Malaysia, Oman, Saudi Arabia, Singapore, South Korea and Vietnam.
The lender serves customers worldwide from offices in 64 countries and territories with assets of $2.92 trillion by 30 June, so that it is among the world's greatest banking and financial services.
