StanChart executes Bangladesh’s first-ever blockchain LC transaction
Standard Chartered has executed the country's first-ever blockchain transaction by issuing a letter of credit for Viyellatex, in a development that may go on to help make the procedure for trade, both at local and global levels, much streamlined.
"The complete process was smooth and hassle-free. It's just like the transaction on a mobile financial service agency -- you made a transaction through SMS or an app," KM Rezaul Hasanat, chairman and ceo of Viyellatex Group, a high garment exporter, told The Daily Star yesterday.
The entire transaction was paperless and completed digitally by Contour, a worldwide network of banks, corporates and digital solutions, all using one linked decentralised platform leveraging Corda blockchain.
A blockchain is a database that is shared across a network of computers. Once an archive has been put into the chain it is extremely difficult to change. To make sure all the copies of the database will be the same, the network makes frequent checks, according to Reuters.
Blockchains have already been used to underpin cyber-currencies like bitcoin but many other possible uses in areas such as banking and offer chain are emerging.
Under the transaction, Viyellatex -- which exports $300 million worth of garment and textile items and counts Puma, S Oliver, Espirit, Marks and Spencer and Sainsbury among clients -- imported textile items from Viyellatex Spinning.
Standard Chartered acted as the issuing bank for the applicant in addition to the advising bank for the beneficiary of the letter of credit (LC).
A lot of the garment exporters source recycleables such as for example textiles and yarn in addition to accessories locally through inland LCs, which involve tedious paperwork.
Normally, Viyellatex must prepare a credit card applicatoin requesting LC and a worker has to visit the bank with the printed application at hand it over.
A designated person from the supplier has to come to the lender as well to receive the copy of the order following the bank's scrutiny.
Later, the supplier submits an invoice after shipping the things and a person from Viyellatex has to obtain it. When Viyellatex gives a nod, the lender makes payment to the supplier.
With Contour, there will be no such paperwork and no dependence on bank visits. All parties -- buyers, banks, beneficiaries -- involved in the process can perform all tasks by just logging to Contour's network.
"It is not cumbersome like normal ones. Besides, it's time and cost-efficient," Hasanat said.
Built on R3's Corda blockchain, Contour offers a distributed trade network enabling an enhanced degree of collaboration across the main factors of trade with all participants leveraging the network to create and renew trade data in real-time.
"If you want to name the top five good thing about this, they are paperless, real-time, low-cost, faster and error-free," said Naser Ezaz Bijoy, CEO of Standard Chartered Bangladesh.
Though it has been done locally, Standard Chartered would soon expand the service for cross-border exports and imports, he said.
For that, everything will be paperless aside from some regulatory processes of the Bangladesh Bank and customs formalities.
Contour increases data transparency, removes administration costs and reduces friction in global trade, all resulting in an overall upsurge in efficiency and reduction in costs for all parties, Standard Chartered Bangladesh said in a news release.
As one of the founding members of Contour, the multinational bank advantages from the network, which simplifies the LC process, delivering shorter settlement times, instant discrepancy resolution and simplified sanctions screening.
"We are incredibly excited to provide our clients improved speed and reduced risks of settlement offered by platforms such as Contour," Bijoy added.
The global trade lacks a remedy that drives out inefficiencies, increases data transparency and enables interoperability between all trade participants, said Carl Wegner, CEO of Contour.
The long-established elements of trade finance don't possess sufficient integration, triggering friction and unnecessary administration.
These inevitably cause significant barriers for global trade growth, adding complexity, increasing cost and delaying the process for both banks and corporates, he added.
"The Contour network can overcome these issues, providing a consistent and reliable infrastructure for global trade to flourish, especially in countries like Bangladesh that count on LCs for a significant part of their trade volumes."
The recent transaction with Viyellatex serves to prove a solution exists and designed for adoption, Wegner added.
This is not the only blockchain-based transaction that British lender has in store for its clients.
Standard Chartered is also rolling out a blockchain-based service for expatriate Bangladeshis in Malaysia, the fifth-highest source of remittance for the united states, enabling them to send money home on a real-time basis.
"The service will be launched soon and we've partnered with a local MFS provider and a Malaysian company," Bijoy said.
According to the arrangement, remitters should be able to submit their hard-earned profit real-time by opening a mobile wallet with Malaysian fintech firm Valyou, a subsidiary of Telenor Group.
The amount from Valyou would then be wired through Standard Chartered's operations in Malaysia and Bangladesh. Once in Bangladesh, bKash would distribute the funds, ending the chain of cross-border transaction that harnesses the power of technology.
This means migrant personnel in Malaysia would be able to settle their cross-boundary transactions in real-time with only a few clicks on the mobile phone, within an arrangement not seen before in Bangladesh.
Corda, the blockchain platform, would facilitate the transaction.
The platform, which was designed to bring transparency and trust to interactions while maintaining privacy and security, ensures data is shared only with the parties that need to know.
