Hong Kong’s banking regulator and seven banks, including HSBC Holdings and Standard Chartered, said they will jointly launch a trade finance platform in September using blockchain technology.
The platform will be one of the largest examples globally of a government-led, cross-bank effort to reform the multi-billion-dollar trade finance sector using the distributed ledger technology that underpins digital currencies such as bitcoin.
The sector is often described as one of the most manual and paper-orientated parts of the financial services industry.
The blockchain project is aimed at digitizing documents and automating processes to reduce risk and increase the financing capability of the banking industry, said Howard Lee, deputy chief executive of the Hong Kong Monetary Authority (HKMA), the territory’s de facto central bank and banking regulator
“The next major milestone ... is to link up with other trade platforms in other jurisdictions to further facilitate cross-border trades,” Lee said in a joint statement with the participating firms.
A 2017 survey by the Asian Development Bank found the global trade finance gap - the amount of unmet demand for trade finance - was $1.5 trillion, 40 percent of which originated from the Asia-Pacific region.
Market participants hope emerging technology, including blockchain, will allow them to serve more clients while also serving existing clients more effectively.
To that end, banks, governments and technology firms have been investing in technology for trade finance.
In May, HSBC and ING Groep said they performed the world’s first trade finance transaction using a single blockchain platform. The platform, Corda, was developed by New York-based blockchain consortium R3.
The other banks involved in the Hong Kong initiative are BOC Hong Kong Holdings, Hang Seng Bank, Bank of East Asia, Australia and New Zealand Banking Group and Singapore’s DBS Group Holdings.
The technology will be provided by Ping An Insurance Group Co of China.