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HomeDigitalizationBlockchainIs Blockchain seeing a resurgence to digitalise Trade and Trade Finance..??

Is Blockchain seeing a resurgence to digitalise Trade and Trade Finance..??

Blockchain technology has been explored in several areas for a while now as a solution for digitalisation of supply chain, trade, and trade finance..

A blockchain is essentially a digital ledger of transactions that is duplicated and distributed across the entire network of computer systems on the blockchain..

Each block in the chain contains several transactions, and every time a new transaction occurs on the blockchain, a record of that transaction is added to every participant’s ledger..

The decentralized database managed by multiple participants is known as Distributed Ledger Technology (DLT)..

Blockchain technology offers numerous applications that significantly enhance the efficiency, security, and transparency of transactions..

Blockchain technology which was initially met with excitement and later skepticism, seems to be experiencing a resurgence in the trade and trade finance sectors driven by the technology’s potential to solve longstanding issues related to transparency, efficiency, and security..

This raises the question as to whether Blockchain is back in the game to digitalise Trade and Trade Finance..

Insights from Blockchain Supply Chain Association

Blockchain Supply Chain Association (BSCA) has released the inaugural issue of its Magazine which explores the Big Impact on Supply Chain – Unleashing the power of blockchain..

As per the magazine, below are some of the key ways in which blockchain can be used in these sectors

  1. Digital Documentation: Blockchain can digitize and securely store trade documents such as bills of lading, letters of credit, and invoices.. This reduces the reliance on paper documents, minimizes the risk of document fraud, and accelerates the verification process..
  2. Smart Contracts: These are self-executing contracts with the terms of the agreement directly written into code.. Smart contracts can automate various trade finance processes, such as payment settlements, compliance checks, and trade execution, thereby reducing the need for intermediaries and expediting transactions..
  3. Supply Chain Transparency: Blockchain provides end-to-end visibility in the supply chain by recording every transaction and movement of goods on a tamper-proof ledger.. This transparency helps in tracking the origin and journey of products, ensuring authenticity, and reducing the risk of counterfeiting..
  4. Fraud Prevention: The immutable nature of blockchain records makes it difficult for fraudulent activities to go unnoticed.. Every transaction is time-stamped and linked to the previous one, creating a verifiable chain of custody..
  5. Cost Reduction: By streamlining processes, reducing paperwork, and minimizing the need for intermediaries, blockchain can significantly cut down the costs associated with global trade and trade finance..
  6. Access to Financing: Blockchain enables new financing models such as tokenization of assets and peer-to-peer lending platforms, which can provide small and medium-sized enterprises (SMEs) with greater access to trade finance..

In the foreword for the first edition of the Blockchain Supply Chain Association magazine Emmanuelle Ganne, Senior Analyst at the World Trade Organization (WTO), said the “first edition of the Blockchain Supply Chain Association magazine offers a timely exploration into how blockchain technology can strengthen supply chains, increase traceability, promote collaboration and help meet ESG goals and comply with emerging requirements.

How blockchain assists in trade finance transactions

Traditional trade finance processes are often slow and cumbersome, involving significant paperwork and manual verification which Blockchain and DLT streamline by digitizing the trade finance documents and automating workflows..

As per the magazine, blockchain technology provides an immutable and transparent ledger, crucial for trade finance with every transaction recorded on a decentralized ledger, ensuring that all parties have access to the same information..

Trust is a critical component in trade finance, where multiple parties, including exporters, importers, banks, and insurers, need to collaborate.. With blockchain, each party can independently verify the authenticity of transactions, fostering a trustworthy environment..

This transparency reduces the risk of fraud and errors, as every transaction is traceable and cannot be altered once recorded, building trust among participants..

Smart contracts automate the execution of agreements when predefined conditions are met, reducing the need for intermediaries and speeding up transactions leading to faster settlement times and reducing the administrative burden on businesses..

By minimizing the delays associated with manual processing, blockchain enhances overall efficiency in trade finance..

Use cases for blockchain in trade

Blockchain’s resurgence in trade finance is evidenced by several innovative projects and frameworks making headlines.. TradeTrust, for example, is a pioneering framework enabling the verification of authenticity and source of documents and allowing for Electronic Transferable Records (ETRs)..

TradeTrust supports multiple blockchain platforms like Ethereum, Polygon, and XDC, emphasizing interoperability and robustness. “TradeTrust’s framework supports Ethereum, Polygon, and XDC, emphasizing interoperability and blockchain strength“..

Another notable case is the XDC Trade Network, which simplifies global trade processes using Straight-Through Processing (STP) and flexible API connectivity..

This platform ensures robust data protection and supports seamless capital raising, and competitive financing.. Plans include asset tokenization and ESG integration, aiming for a faster, safer, and more sustainable global trade environment..

The XDC Trade Network is set to revolutionize global trade by simplifying processes using Straight-Through Processing (STP) and flexible API connectivity“..

Docklab, an organization in the maritime industry, leverages blockchain to address ESG challenges, transforming industries and driving positive change in collaboration with partners across various sectors..

Their partnership with the Port of Rotterdam showcases the traceability of sustainable supply chains and facilitates carbon footprint tracking.. “Docklab’s partnership with the Port of Rotterdam showcases the traceability of sustainable supply chains and facilitates carbon footprint tracking“..

As per the magazine, the other benefits of blockchain and DLT technology include

  1. Cost Reduction
  2. Security and Fraud Prevention
  3. Inclusivity and Accessibility
  4. Tokenization
  5. Environmental Sustainability

Conclusion

The digitalisation of trade and trade finance through blockchain and DLT is transforming the industry by enhancing transparency, efficiency, and security.. The benefits of these technologies, including cost reduction, fraud prevention, inclusivity, and environmental sustainability, are driving their adoption across the global trade finance landscape..

As businesses continue to embrace blockchain and DLT, the future of trade finance looks more promising, efficient, and accessible than ever before and the resurgence of blockchain is seen as a testament to its potential to revolutionize trade and finance..


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Hariesh Manaadiar
Hariesh Manaadiarhttps://www.shippingandfreightresource.com
I am Hariesh Manaadiar, the Founder of Shipping and Freight Resource.. I have been in the dynamic shipping and freight industry for over three decades and have worked in several sectors.. I share my experiences and knowledge of the industry through this blog for those looking for help in the industry.. Stay subscribed for more free useful content about shipping, freight, maritime, logistics, supply chain and trade..

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