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.

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

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Featured insights

Trade Finance in the modern era Embracing agility Trade Finance in the modern era: Embracing agility Hear from Finastra’s Iain MacLennan on the changing nature of Trade Finance. Discover the challenges and opportunities of digitalisation.
The role of asset-backed securitisation Can it bridge the financing gap for micro and SMEs The role of asset-backed securitisation: Can it bridge the financing gap for micro and SMEs? In the world of finance for micro and small and medium-sized enterprises (SMEs), there’s a clear division between two crucial groups: Capital Deployers and Capital Providers. On one side, we have micro, small, and medium enterprises in emerging markets, brimming with potential due to growing local demand and export opportunities.
PODCAST | Year ahead: Swift CIO on balancing uneven payments regulation and advancing CBDC PODCAST | Year ahead: Swift CIO on balancing uneven payments regulation and advancing CBDC 2024 is set to bring about significant changes in finance and banking. Driven by a convergence of cutting-edge technologies, the industry-wide transition to ISO 20022, the rise of digital currencies, and innovative AI-powered solutions, the year holds promise for considerable advancements and enhanced alignment between fintech and traditional financial institutions. 

Blockchain, cryptocurrencies, and DLT – frequently asked questions

What is blockchain?

A blockchain is 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 – everyone can view the blockchain but 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 that are cryptographically 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 its practical applications for international trade and trade finance.

Blockchain technology provides a way to transact directly via a peer-to-peer network securely meaning that counterparties 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’ that is verified by the nodes on the network. The exact method used for this verification (i.e. proof-of-work or proof-of-stake) will differ based on the specific consensus mechanism the network use.

Step 3: If the nodes 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?

Infographic on Blockchain

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 has several possible use cases for a variety of 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?

Blockchain is NOT the same as cryptocurrencies.

Blockchain is a infrastructure technology, on which developers can build other applications.

Many people think that blockchain and cryptocurrencies are the same since the two terms come up in the same sentence quite often as cryptocurrencies are the most widely known application that is built using blockchain technology.

This is similar to how popular websites – like Facebook or Trade Finance Global – are built on a collection of internet infrastructure technologies like HTTP, TCP/IP, and HTML.

Facebook, like many other websites, is built using HTTP in much the same way that cryptocurrencies, like many other applications, are built using blockchain.

To say that the internet is Facebook is as incorrect as saying that blockchain is cryptocurrency.

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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

15Mar

Trade Finance in the modern era: Embracing agility

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Hear from Finastra’s Iain MacLennan on the changing nature of Trade Finance. Discover the challenges and opportunities of digitalisation…. Read More →

27Feb

Digitalising MC13: Global institutions sign pact to promote digital trade

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At MC13, 27 February, a group of leading international organisations forged an agreement to promote a unified goal of developing… Read More →

26Feb

Lloyds Bank and WaveBL partner to enhance digital trade operations

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Learn about Lloyds Bank’s collaboration with WaveBL and the benefits of digital trade documentation for global shipping and trade efficiency…. Read More →

19Jan

The role of asset-backed securitisation: Can it bridge the financing gap for micro and SMEs?

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In the world of finance for micro and small and medium-sized enterprises (SMEs), there’s a clear division between two crucial… Read More →

16Jan

PODCAST | Year ahead: Swift CIO on balancing uneven payments regulation and advancing CBDC

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2024 is set to bring about significant changes in finance and banking. Driven by a convergence of cutting-edge technologies, the… Read More →

08Dec

Top 5 trade lessons from the Contour collapse

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As Contour, the last-standing global trade finance project built on DLT moves to its next stage, we should be honest… Read More →

29Nov

Surecomp announces CargoX as new partner on RIVO platform

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Today, Surecomp announced that CargoX is joining its RIVO™ platform. This partnership enhances Surecomp’s ecosystem, providing customers with centralised access… Read More →

24Nov

British investment firms given approval to launch blockchain-based tokenised funds

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British investment managers have received approval to develop tokenised funds, a process where assets are divided into smaller tokens supported… Read More →

27Oct

Contour collapses: What does this mean for digital trade finance?

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Digital trade finance platform Contour has announced its closure, citing insufficient funding from its bank shareholders. Operations will cease on November… Read More →

02Oct

Navigating the green transition: UNCTAD’s 2023 Maritime Report

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Currently responsible for 3% of global greenhouse gas emissions, maritime transport must decarbonise whilst facing extensive costs and adverse economic… Read More →

26Sep

CargoX and Enigio collaborate with Lloyds Bank and ICC C4DTI to create blockchain interoperability for electronic trade documents

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Both CargoX and Enigio, who operate as independent providers of electronic trade document solutions, have jointly engineered and successfully demonstrated… Read More →

26Sep

VIDEO | Revolutionising trade documentation: Secro’s game-changing solution for eBLs

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For centuries, trade documentation has been a time-intensive and resource-demanding process, involving a multitude of stakeholders and a deluge of… Read More →

19Sep

Citi unveils new digital asset capabilities for institutional clients

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At Sibos, Citi Treasury and Trade Solutions (TTS) has unveiled the initiation and testing stage of Citi Token Services, an… Read More →

13Sep

TFG to host comprehensive Tradecast on UK’s Electronic Trade Documents Act (ETDA)

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Trade Finance Global (TFG), in collaboration with UK Export Finance and the Department for Business & Trade, is set to… Read More →

05Sep

Launch: FIT Alliance brings 5 industry leaders together to move eBL digitalisation forward

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The FIT Alliance, formed of BIMCO, DCSA, FIATA, ICC, and Swift, has initiated the “Electronic Bill of Lading Declaration” to… Read More →

About the Author

Deepesh Patel is Editorial Director at Trade Finance Global (TFG). In this role, Deepesh leads efforts in developing TFG’s brand, relationships and strategic direction in key markets, including the UK, US, Singapore, Dubai and Hong Kong.

Deepesh regularly chairs and speaks at international industry events with the WTO, BCR, Excred, TXF, The Economist and Reuters, as well as industry associations including ICC, FCI, ITFA, ICISA and BAFT.

Deepesh is the host of the ‘Trade Finance Talks’ podcast and ‘Trade Finance Talks TV’. He is co-author of ‘Blockchain for Trade: A Reality Check’ with the ICC and the WTO, alongside other industry research.

In addition to his work at TFG, Deepesh is a Strategic Advisor for WOA, and works closely with ITFA. He also sits on the Fintech Working Group of the Standardised Trust.

Prior to TFG, Deepesh worked at Travelex where he was responsible for the cards business and the Travelex Money app in Europe, NAM, UK and Brazil. Deepesh is Chair of Governors and co-opted LA Governor of the Wyvern Federation, which has responsibility for 5 primary schools in South London.

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