The British investment bank HSBC, One of the biggest in Europe, has carried out the world’s first transaction to fund a commercial deal using blockchain technology. The financial institution has issued a letter of credit (Dutch company ING) to the US Company “Cargill” for Food and Agriculture.
Traditionally, this process takes a long time, multiple documents and multiple exchanges between participating countries are needed.
Blockchain technology promises to change this. It allows transactions to be recorded on a huge virtual network. Like bitcoin, it records all transactions that happen on the web by creating a public register.
Banks have adopted the principles behind the blockchain technology of bitcoin – similar to the idea of decentralized records – and are trying to apply it to the processes they perform.
HSBC and ING said the exchange was done for 24 hours, compared from five up to ten days, as it usually takes to complete such deal through a paper system.
Supporters of the blockchain technology claim that it has the potential to develop into more. Sectors such as commercial finance, healthcare and insurance are considered appropriate for the use of such technology as they rely on significant exchanges of paper documents.
A lot banks are investing in blockchain projects because it is believed ,that technology will have a significant impact on financial services.
Last month, Santander announced its participation with Ripple and their focus is creating a currency exchange service that allows one-day international money transfers.