The list of use cases of blockchain just got bigger as banking giant HSBC has issued a Letter of Credit on a live blockchain. The transaction involves a company called Simply Packaging for importing resin from a Singaporean company. The European bank’s Malaysian arm was the issuing party, while HSBC Singapore is the nominee. This is a first pilot project for HSBC Malaysia; the bank earlier issued a Letter of Credit for the imports of soybeans from Argentina, on R3’s Corda Blockchain.
Commenting on the recent development, HSBC Malaysia CEO Stuart Milne said,
I am very pleased that HSBC has pioneered Malaysia’s first pilot blockchain LC transaction. This showcases our strong commitment and ability to support cross-border trade by Malaysian businesses using cutting-edge technology platforms.
The move is particularly important for the $85 billion trade between Malaysia and Singapore, the two Asian powerhouses. While the transport of goods was possible within 48 hours, it was the heavy paperwork, which took almost a week to get completed. The Letter of Credit to Simply Packaging was issued in a mere 24 hours; therefore, making it the best example to reduce exuberant time consumption, making trade more sustainable.
HSBC, currently the 9th largest bank in the world, is one of the pioneers of blockchain in the banking industry. Apart from issuing letters of credit, the bank uses blockchain to execute forex transactions, as well. In 2018, the bank completed forex transactions worth more than $250 billion, which makes it one of the leading banks in blockchain application.
Blockchain in banking has gained significance in the last few years, with big names like JPMorgan, HSBC, Bank of America, HDFC, ICICI, and several others making investments in the blockchain sector. The trend is expected to continue in the foreseeable future, with major emerging markets in Asia and South America moving towards blockchain adoption.