Fraud and errors present in the funding of international trade can be disastrous given the trillions of dollars in play. Consequently, the Singapore and Hong Kong central banks recently unveiled plans to link their respective trade finance platforms developed via blockchain technology.
Central Banks Link Their Platforms
Back in 2016, the Hong Kong Monetary Authority (HKMA) and a few banks such as HSBC Holdings and Standard Chartered decided to test various uses of distributed ledger technology in order to build a fraud and mistake-proof finance trade platform. Not long afterward, Singapore also began development of a similar platform. Both systems were meant to help avoid considerable losses of capital due to mistakes.
The newly-announced linking of these two platforms represents a carefully-developed partnership between the Hong Kong Monetary Authority and the Monetary Authority of Singapore. This plan will see the two institutions collaborate in order blockchain and fintech projects.
At a fintech conference held in Hong Kong, the chief of HKMA stated: “This interface is likely to be the first of its kind in the world in the application of DLT in solving the century-old problem arising from the inefficiency of the paper-based trade finance system.”
At this time, letters of credit represent the most commonly-used method of mitigating error and fraud risk between exporters and importers, yet the associated process is both expensive and time-consuming.
At the conference, the head of HKMA also stated that the project will bring about a few key benefits, including the digitizing of trade documents, automation of various processes, helping reduce human error and the risk of fraud, allowing the sharing of digitized documentation between participants, and more.
Currently, the financial institutions involved are preparing to hire a developer who will help create and maintain the joint platform.
What are your thoughts on this inter-bank and inter-country partnership on blockchain technology? Let us know your thoughts in the comments.