In a press release issued on 2 September, Europe’s largest bank announced that the first letter of a credit transaction in yuan had been successfully completed on a blockchain basis. A letter of credit is a promise of payment by a bank of an importer to the exporter of the goods or a corresponding service.
Letter of credit transactions are transactions with a high bureaucratic and paper-based burden. HSBC, like other of its competitors, relies on distributed ledger technology to streamline and resource-saving processes.
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Following HSBC’s first commercial trading financing transaction in 2018, settlement in yuan is now another successful milestone. HSBC sees enormous potential in this, as letters of credit worth USD 750 billion were issued in and out of China alone in 2018. The open-source blockchain platform R3 Corda launched Voltron together with eight banks (HSBC, Bankok Bank, BNP Paribas, CTBC Holding, ING, NatWest, SEB and Standard Chartered) in October 2018.
The aim is to digitize trade finance documents and attract new partners. BTC-ECHO had already reported on HSBC in February.
By using distributed ledger technology in 2018, the big bank was able to save around a quarter of the administrative costs of foreign exchange trading.