Trade finance’s blockchain dreams still far from reality
Blockchain has the potential to revolutionize trade finance, but a lack of standardization will hinder its adoption.
Transaction bankers are hopeful that the use of distributive ledger technology (DLT), or blockchain, will improve trade finance by cutting costs and time related to bulky trade finance deals.
However, one factor that is slowing the broader adoption of DLT is the lack of standardization in the industry. This is exacerbated by the sheer number of consortia and DLT platforms that have emerged.
“This is one of the first times we have seen banks join forces and work together to come up with solutions in trade finance largely because it is one way that banks can limit risk and costs when it comes to trailing new ideas,” says Raphael Barisaac, global co-head of trade and working capital solutions at UniCredit and we.trade board member.
“The technology works – we have shown this time and time again. Regulation needs to step in alongside legal frameworks as regards DLT in order to streamline and boost the use of this technology in all areas, including trade finance.”
There are now around 30 consortia all working towards using DLT in trade finance.