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As 2017 draws to a close, there are signs that we are moving beyond the proof of concept era for blockchain technology.
In the past days, a number of trade and non-trade-related blockchain programmes have gone live, showing the functionality of the technology and feeding the widely-held view that 2018 will be the year in which it takes root commercially.
“There are six to 10 blockchain projects in production in China. They’re just not announcing them yet. I can assure you that blockchain is no longer in proof of concept – many projects are in production,” says Paul Sin, Deloitte’s fintech consulting partner in Hong Kong.
Sin has just helped launch the world’s first cross-border bancassurance distributed ledger technology (DLT) platform, working with China Life Insurance and Guangfa Bank in Macau.
While the solution is not related to trade finance, it has obvious resonance for other forms of insurance, such as property and casualty (P&C), marine and trade credit.
China Life and the Macau branch of Guangfa Bank have implemented a blockchain-based platform for selling bancassurance and settling payments cross-border. All relevant data is stored on the blockchain, which the developers say makes the insurance cycle quicker and less complex.
Bancassurance is a partnership that allows an insurance company to sell its products to the bank’s client base. However, in the future, vendors from other insurance verticals could use this blockchain-based marketplace to sell products distributed through banks.
Sin tells GTR: “In the past, settling commission took a very long time, with a lot of discrepancies,” he says. This system helps ameliorate these issues, and allows the product to be distributed cross-border in a more efficient way.
“In the past, the regulator wouldn’t let you send sensitive information cross-border. It made data exchange complicated. But blockchain promises that the data will be highly secure, it is hashed. We’ve done a lot of educational sessions with the regulator. These regulators now understand the technology and are supportive,” he says.
In another sign that the technology may be fit for commercial purpose, SME lending platform ModulTrade has settled its first blockchain-based export transaction out of China.
Using ModulTrade’s platform, Guangzhou Fuilie Trading sold a 3D printer to a counterparty in Russia. The goods were shipped by China Post once the seller saw the funds had been launched on the smart contract. Upon successful delivery of the goods, the funds were automatically released to the seller.
This transaction was small – just over US$1,000 – but again shows that the technology is beginning to be used outside of the laboratory. Evgeny Kaplin, ModulTrade CEO, tells GTR that later this month, he plans to visit China to sign agreements with Chinese producers of mining equipment, who will start exporting their products on the Ethereum-based platform.
Meanwhile, in Australia, AgriDigital has successfully completed another proof of concept that brings its blockchain solution for commodities closer to production.
The company teamed up with Rabobank to complete an inventory financing transaction on the blockchain that resulted in a real-time payment for farmers. The exercise tested whether the blockchain-based solution could facilitate a commodity purchase and sale transaction, with automated settlement.
“This included the transfer of ownership and delivery of grains to Rabobank through a smart contract as well as automated cash flow settlement – all in bank-backed digital Australian dollars. We did this successfully and there was a lot of excitement as we saw all of these different transactions auto-complete at the same time,” says AgriDigital CEO, Emma Weston.
All payments were made in real time, using a Rabobank-backed digital dollar, pegged to the Aussie dollar. The digital dollar was issued and cleared by a central issuing and settlement institution.
This comes after AgriDigital completed two successful pilots with CBH Group earlier in the year, which showed that the technology could eliminate counterparty risk and track the provenance of agri produce. Rabobank’s head of trade and commodity finance, Ilze Nijs, says that this pilot has scope to be expanded.
“In addition, we see significant benefit in the creation of a centralised database with commodity details leading to ‘one version of the truth’ for all parties and simplification of the reconciliation process. We recognise there is significant potential to widen the scope of this initiative in a pilot and develop a digitalised inventory product for our client base,” Nijs says.
AgriDigital has earmarked 2019 for the launch of its blockchain-based solution. Its cloud-based commodity management platform was launched in August and has been adopted by grain growers, buyers and bulk handlers in Australia and overseas.
By that point, it’s likely that a multitude of other blockchain-based solutions will have gone live, as the technology finally moves towards commercialisation.
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