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 digitize 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, as well as 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, so too can blockchain and related technologies create a flatter, smarter, more connected, and overall better world for global trade and commerce.

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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

VIDEO: Industry Leader Perspective: The Currency and Cross-border Payments (R)evolution Kenneth Wong, Director, Global Transaction Banking, TD Securities, talks about the changing payments landscape, cross-border payments and digital currencies.
CargoX authorized by the Egyptian government as Blockchain Provider for ACI Declaration Misr Technology Services (MTS), which operates Egypt’s National Single Window for Foreign Trade platform (Nafeza), has authorized CargoX to act as the blockchain document transfer gateway for the Advance Cargo Information (ACI) System.
The birth of platforms and what this means for trade credit insurance In the last 25 years, trade and its financing have increasingly come to rely on the internet and new tools such as connectors, digital payments, and cybersecurity.

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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

We assist companies to access trade and receivables finance through our relationships with 270+ banks, funds and alternative finance houses.
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Latest News

04May

VIDEO: Industry Leader Perspective: The Currency and Cross-border Payments (R)evolution

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Kenneth Wong, Director, Global Transaction Banking, TD Securities, talks about the changing payments landscape, cross-border payments and digital currencies…. Read More →

29Apr

AI to help automate Bank of Africa’s documentary checking, thanks to Conpend and Finastra

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Finastra has announced BANK OF AFRICA, a pan-African financial group, has selected Conpend’s TRADE AI app from its open innovation… Read More →

29Apr

New electronic Bill of Lading introduced by MSC using WAVE BL’S platform

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MSC customers will be able to receive the bill of lading electronically, without any change or disruption to their day-to-day… Read More →

26Apr

TFG Weekly Trade Briefing, 26th April 2021

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Your Monday morning coffee briefing from TFG. FCI reports a drop in global factoring statistics in 2020, linked to a… Read More →

23Apr

CargoX authorized by the Egyptian government as Blockchain Provider for ACI Declaration

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Misr Technology Services (MTS), which operates Egypt’s National Single Window for Foreign Trade platform (Nafeza), has authorized CargoX to act… Read More →

22Apr

HSBC and Tata Steel successfully execute a blockchain-enabled, paperless trade transaction – a global first for the steel industry

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HSBC India and HSBC UAE have successfully executed a blockchain-enabled, live trade finance transaction between Tata Steel Ltd. (India) and… Read More →

12Apr

The birth of platforms and what this means for trade credit insurance

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In the last 25 years, trade and its financing have increasingly come to rely on the internet and new tools… Read More →

12Apr

Podcast: Bring back paper documents! Is the document the missing part of digital trade puzzle?

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By understanding how paper documents work, we explore whether trace:original by Enigio, is an alternative way of approaching digital trade…. Read More →

07Apr

Model Law on Factoring: UNIDROIT’s Approach to Receivables Financing

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Factoring, as an important method to extend credit, is a type of financial transaction where the creditor assigns its receivables… Read More →

30Mar

COVID-19: A Catalyst for Digitalization?

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The pandemic has undoubtedly had countless negative implications for the global community. However, amidst all the turmoil there have been… Read More →

30Mar

VIDEO: Trade Digitalization and Financing: New Hope for MSMEs

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MSMEs around the globe struggle to obtain financing. Why do these MSME financing constraints exist and is a digital future… Read More →

30Mar

ICC, TFG and WTO release the latest research on trade digitalization facilitating MSME financing

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WTO, TFG and ICC have today launched their latest publication ‘Accelerating trade digitalization to support MSME financing’… Read More →

29Mar

How NFTs might play a role in international trade

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You might have heard a lot of hype around these things called NFTs, or non-fungible tokens. How can these digital… Read More →

25Mar

Finastra Integrates Enigio Solution with Fusion Trade Innovation to Make Paperless Trade Finance a Reality

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More than 90% cost savings could be possible from using distributed ledger technology to handle authoritative digital original documents… Read More →

17Mar

TFG and ICC partner up with the WTO and the Global Blockchain Forum

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ICC, TFG and WTO are partnering at the 2021 Global Trade & Blockchain Forum, themed “Accelerating Trade Digitalization through DLT”…. Read More →

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