In partnership with Dutch bank ING, HSBC used a blockchain platform called Corda developed by the software consortium R3 to manage the credit letter for the shipment of soybeans from Argentina to Malaysia for U.S. food group Cargill. A shipment of soybeans was transported from Argentina to Malaysia, via Cargill's Geneva and Singapore subsidiaries. HSBC used a blockchain platform overseen by the consortium R3 to issue a letter of credit to ING to help Cargill complete the transaction.
HSBC says that the Cargill deal proves blockchain is ready for commercial use, as the deal could also be quickly replicated to allow for fast future trades.
Similarly, it will take some time for every finance institution to settle on a single blockchain standard to conduct these transactions.
The companies exchanged the information needed for the letter of credit in 24 hours, the banks said.
HSBC and ING said the technology is "perfect" for trade because it keeps an unchangeable log of the transaction and details of the products being bought or sold.
"The need for paper reconciliation is removed because all parties are linked on the platform and updates are instantaneous", he continued.
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Although blockchain has most commonly been associated with person-to-person transactions using cryptocurrencies like Bitcoin, there's been a huge amount of interest from businesses both big and small in adopting the technology for a wide variety of other purposes. HSBC is reportedly using the Corda blockchain platform.
Despite their general hostility towards cryptocurrency industry, a growing number of banks have started embracing its underlying technology-the blockchain.
Last Year, HSBC was awarded "World's Best Bank" and "North America's Best Bank for Transaction Services" among a list of many others, at the 2017 Euromoney Awards.
The bank added: "Blockchain can pull trade into the digital age".
According to Ramachandran, HSBC has another client lined up for another similar transaction. This consortium now holds more than 100 different banks, trade associations, and regulators.
R3 and the group of 12 banks supporting the Corda application are seeking to expand the network on an open basis to drive adoption across the industry.