Blockchain for Trade Finance

Blockchain for Trade Finance | ICC, TFG and WTO Guide

Trade Finance Global / Blockchain for Trade Finance

Blockchain for Trade Finance

Welcome to our blockchain hub, a comprehensive guide by Trade Finance Global on the use of distributed ledger technologies (DLT) and blockchain within international trade, trade finance, and shipping.

Consortia, networks, and technologies have emerged in attempts to digitise trade, yet to date, their applications have been relatively unsuccessful and disjointed.

We investigate some of the key opportunities and challenges the in the current ecosystem, and take an in-depth look at what needs to happen for the industry to evolve.

Just as TCP/IP, HTML, and HTTP provide shared and open standards and protocols that enabled the internet to become what it is today, so too can blockchain and related technologies create a flatter, smarter, more connected, and overall better world for global trade and commerce.

Download our free Blockchain for Trade Guide

Following the launch of TFG / WTO / ICC’s publication “Blockchain & DLT in trade: A reality check” in November 2019 at the WTO Global Blockchain Forum, this updated research study provides an overview and updated periodic table.

The study outlines the main projects, categories into Supply Chain Finance, Trade Finance, Know Your Customer (KYC), Insurance, DLT Digitiisayion of Trade Documents, Shipping & Logistics / Supply Chain, Other Initiatives and Marketplaces. The authors also mapped out 19 standardization initiatives, split by sector or process, general trade, private sector-led and regional / national initiatives, as well as the international standards bodies.

Video – WTO & TFG Launches ‘Blockchain & DLT for Trade: Where do we stand?’

Research – Blockchain for Trade Finance

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Videos – Blockchain & DLT for Trade

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Featured Insights

2021 – A Year in Review with Trade Finance Global As the clocks strike midnight, we look back at over 700 articles, handpicking our favourite stories that made the headlines in 2021
In conversation: New Enigio CEO Patrik Zekkar talks about the journey to a digital future for trade finance In conversation: New Enigio CEO Patrik Zekkar talks about the journey to a digital future for trade finance This month, Trade Finance Global (TFG) Editor Deepesh Patel spoke with Zekkar to find out more about his journey to Enigio, his new role, and his outlook on digitalisation in trade and supply chain finance.
A Britcoin a day keeps the banks away A Britcoin a day keeps the banks away This week, at a House of Lords Economic Affairs Committee hearing on CBDCs, Sir Jon Cunliffe, deputy governor for financial stability at the Bank of England, revealed some interesting findings on the potential impacts of Britcoin.

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Blockchain, Cryptocurrencies & DLT – Frequently Asked Questions

What is Blockchain?

A blockchain is essentially a decentralised, distributed ledger that permanently records transactions. ‘Decentralised’ means that no single individual or group has excess control over the exchanges. ‘Distributed’ means that the ledger is sent out to many computers. In other words, it’s made public and thus is completely transparent. Whilst everyone can view the blockchain, nobody can amend it.

The term ‘blockchain’ is derived from the way the technology works. Each ‘block’ contains encoded data of groups of valid transactions. These transactions are linked to previous blocks to form a ‘chain’, hence we get the name ‘blockchain’.

It’s not necessary to understand the complexities of how the technology works to understand what it does. Blockchain technology provides a way to transact directly via a peer-to-peer network securely. This means that you can use the blockchain to transact without any middlemen.

What is blockchain?

A blockchain is essentially a decentralised, distributed ledger that permanently records transactions. ‘Decentralised’ means that no single individual or group has excess control over the exchanges. ‘Distributed’ means that the ledger is sent out to many computers. In other words, it’s made public and thus is completely transparent. Whilst everyone can view the blockchain, nobody can amend it.

The term ‘blockchain’ is derived from the way the technology works. Each ‘block’ contains encoded data of groups of valid transactions. These transactions are linked to previous blocks to form a ‘chain’, hence we get the name ‘blockchain’.

It’s not necessary to understand the complexities of how the technology works to understand what it does. Blockchain technology provides a way to transact directly via a peer-to-peer network securely. This means that you can use the blockchain to transact without any middlemen.

How does blockchain work?

Transactions are recorded to a blockchain through 5 important steps:

Step 1: Two parties initiate a transaction by agreeing to exchange something of value. In most cases, this will be a cryptocurrency token or other asset.

Step 2: This pending transaction joins others and creates a ‘block’ which is then sent out to ‘miners’. Miners are computers on the blockchain network that evaluate transactions to earn a reward. This reward is usually new cryptocurrency tokens or a part of the transaction fee. They validate the transaction by solving complex mathematical problems using computer power.

Step 3: If miners reach consensus to validate the transaction, it’s verified and added to the blockchain.

Step 4: A timestamp is added to this transaction block using a cryptographic receipt. As each block has a reference to the hash of the previous block, there is an unalterable chain of records.

Step 5: The transaction is complete and the unit of value is transferred to the receiving party.

Infographic: How does Blockchain work?

Source: By Shivratan rajvi [CC BY-SA 4.0  (https://creativecommons.org/licenses/by-sa/4.0)], from Wikimedia Commons

What is blockchain used for?

Blockchain technology was originally designed as the foundation upon which cryptocurrencies could be built. Since then, and it’s use cases have expanded hugely as the technology has evolved. The invention of Ethereum’s Smart Contracts made it easier for developers to build applications for many different industries, including:

  • Cybersecurity
  • Travel
  • Banking
  • Trade finance
  • Cloud storage
  • Legal
  • Insurance
  • Healthcare

The reason that blockchain has so many use cases is that it provides a reliable, secure and transparent network. This makes it useful for any business that could benefit from a way to transfer data securely, quickly and transparently.

Are cryptocurrencies and blockchain the same thing?

Contrary to popular belief, blockchain and cryptocurrencies aren’t one in the same. Many people think that this is the case as the two terms come up in the same sentence quite often – they’re closely linked.

Cryptocurrencies are digital currencies – they’re units of value that take the form of tokens. The blockchain is the digital ledger that stores a record of all cryptocurrency transactions. Blockchain is also used in other applications outside of cryptocurrencies.

What are cryptocurrencies used for?

There are several use cases for cryptocurrencies, including:

Cross-border payments:

Sending fiat currencies internationally often comes with excessive fees for international transfers. It’s also a lengthy and time-consuming process to complete through regular banks. Cryptocurrencies allow you to send money across international borders directly. The exchange is completed almost instantly and with minimal fees.

Anonymous transactions:

Cryptocurrencies offer higher levels of anonymity than fiat currencies. This makes them ideal as a medium of exchange for transactions where a high level of anonymity is preferred.

As an investment vehicle:

The cryptocurrency market is hugely volatile, but it has seen massive growth over the last decade. It’s an accessible market for beginner investors who are willing to invest in high-risk, high-reward assets.

What are the most common cryptocurrencies?

Bitcoin is the most popular cryptocurrency. As it was the inaugural cryptocurrency, it benefited from a first-mover advantage which has allowed it to remain the leading cryptocurrency by market capitalisation.

According to CoinMarketCap, the top 5 cryptocurrencies by market capitalisation as of July 2018 are:

  1. Bitcoin
  2. Ethereum
  3. XRP
  4. Bitcoin Cash
  5. EOS

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Contents

Access trade, receivables and supply chain finance

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Latest News

31Dec

2021 – A Year in Review with Trade Finance Global

0 Comments

As the clocks strike midnight, we look back at over 700 articles, handpicking our favourite stories that made the headlines… Read More →

21Dec

In conversation: New Enigio CEO Patrik Zekkar talks about the journey to a digital future for trade finance

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This month, Trade Finance Global (TFG) Editor Deepesh Patel spoke with Zekkar to find out more about his journey to… Read More →

25Nov

A Britcoin a day keeps the banks away

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This week, at a House of Lords Economic Affairs Committee hearing on CBDCs, Sir Jon Cunliffe, deputy governor for financial… Read More →

03Nov

The evolution and history of letters of credit

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Letters of credit emerged in Europe in the 1800s. However, in their early days the functionality of letters of credit… Read More →

29Oct

South Africa’s Standard Bank chooses Flutterwave for Africa digitalisation drive

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South Africa’s Standard Bank has launched a new digital payments partnership with Africa-based fintech Flutterwave. Under the terms of the… Read More →

26Oct

BNP Paribas executes green repurchase agreement (repo) with EDF

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French international bank BNP Paribas has executed a green repurchase agreement (repo) transaction with state-owned utility company Électricité de France… Read More →

26Oct

Commodity finance: A story of caravels, carracks, clippers and artificial intelligence

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Merchants would go on voyages for several weeks, if not months, in a caravel, carrack or clipper to the Far… Read More →

20Oct

Can SMEs benefit from digital solutions in trade finance?

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In most countries, small and medium enterprises are important contributors to economic welfare. This is the main reason why a… Read More →

19Oct

Sustainable supply chains: an accelerator to boost sustainability goals?

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The magnitude and pressure around climate change and the United Nations (UN) agenda can give an opportunity to make a… Read More →

14Oct

Contour partners with Shenzhen FinTech Institute of the People’s Bank of China to increase trade digitisation across Asia

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Contour, the digital trade finance network, announces partnership with the Shenzhen FinTech Institute, a subsidiary of The People’s Bank of… Read More →

13Oct

Agri-D Convention: bringing global experts to the stage for the future of our food

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With the release of the preliminary agenda for the free-to-attend Virtual Agri-D Convention, being held on the 12th November, there… Read More →

13Oct

ITFC on the impact of COVID-19 on Islamic Finance

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TFG’s editor, Deepesh Patel, interviewed Nasser Al-Thekair, general manager of trade and business development at the International Islamic Trade Finance… Read More →

06Oct

IBM partners with MonetaGo for trade finance deduplication

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Tech giant IBM is teaming up with fintech startup MonetaGo to address trade finance fraud, with an initial focus on… Read More →

04Oct

Is Digital Identity the key for unlocking MSME access to Trade Finance?

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In a world of shrinking supply chains and digital connectivity, the concept of identity is continuously evolving. Is digital identity… Read More →

22Sep

Digital Trade Transaction: A novelty or a necessity?

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In the wake of the ICC Uniform Rules for Digital Trade Transactions (URDTT) due to publish next month in October,… Read More →

About the Author

Trade Finance Global (TFG) assists companies with raising debt finance. While we can access many traditional forms of finance, we specialise in alternative finance and complex funding solutions related to international trade. We help companies to raise finance in ways that is sometimes out of reach for mainstream lenders.

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