HSBC completes Letter of Credit transaction using Voltron blockchain platform

Banking giant HSBC has announced that it has successfully carried out a live Letter of Credit (LC) transaction between Australia and China using Voltron, a blockchain-based trade finance platform, Ledger Insights reported.

The transaction was conducted in collaboration with two HSBC clients – Fox & Lillie and China SDIC International Trade Nanjing Company. Fox & Lillie sent a shipment of wool from Australia to China.

Blockchain technology helps to enhance the security of the process as it enables authenticating the source of data and documents.

“As a trading company, we’ve long dealt with issues in paper-based transactions including the lengthy time needed in the exchange of documents, delays caused by amendments and lack of security and transparency,” said Yang Xiaoxiong, Chairman of China SDIC International Trade Nanjing Company.

“We are ready to further explore the new technology more broadly together with our banking and trading partners.”

HSBC is one of the founding members of Voltron, which was officially announced in October 2018. Voltron initially began as a project within the R3 blockchain consortium. Other founding members include Bangkok Bank, BNP Paribas, CTBC Holding, HSBC, ING, NatWest, SEB, Standard Chartered, Bain, CryptoBLK, and R3.

By leveraging R3’s Corda, Voltron aims to digitalize the LC process which can significantly lower the processing time and cost.

“China is the world’s largest issuer of LCs by value – almost $750 billion in 2018. Digitising this market will shake up trade finance in China – reducing the amount of paperwork required to complete a transaction, shortening turnaround time and greatly lowering the cost of trade,” said Ajay Sharma, HSBC’s Asia Pacific Regional Head of Global Trade and Receivables Finance.

Last month, reports suggested that HSBC was seeking to expand the number of banks involved in the initiative. Joshua Kroeker, HSBC's innovation director on blockchain, said that the bank is now seeking to commercially launch the Voltron platform in the near future.

This, however, is not the first live transaction using Voltron. In May 2018, HSBC and ING completed a blockchain-based trade finance transaction for a shipment for soya beans from Argentina to Malaysia for food and agriculture conglomerate Cargill.

In November, HSBC India and ING Bank Brussels executed a live trade finance transaction involving an export from Indian energy giant Reliance Industries to US-based Tricon Energy using blockchain technology.