The Bangladesh branch of global banking firm HSBC has conducted the country’s first blockchain-based letter of credit transaction on the Contour DLT platform.
The transaction was used to settle the importation of 20,000 tonnes of fuel oil from United Group’s Singapore subsidiary United Mymensingh Power.
HSBC Bangaladesh’s chief executive, Md Mahbub ur Rahman, described the transaction as showcasing the bank’s commitment “to supporting cross-border trade by Bangladeshi businesses using cutting-edge technology platforms.”
“I believe this will usher in a new era of routing international trade transactions as businesses and governments recognize transparency, security and swiftness in performing tasks using blockchain technology.”
Global payments service SWIFT estimated that Bangladeshi trades using letters of credit, or LCs, were worth more than $34 billion during the first half of 2020.
By utilizing blockchain technology, the time taken to process the transaction was reduced from between five and 10 days to less than 24 hours. United Group’s managing director, Moinuddin Hasan Rashi, said:
“Fuel oil LCs are highly time-sensitive where every second counts and we believe this blockchain technology will help to manage time efficiently and also ensure increased efficiency and better cost management.”
Contour is a blockchain platform built using R3’s Corda that connects financial institutions and corporate entities in a “decentralized trade finance network.”
Contour is owned by eight financial institutions including HSBC, ING, Citi, Bangkok Bank, BNP Paribas, Standard Chartered, SEB and CTBC. The platform’s development began in mid-2017, then dubbed “Voltron,” before launching in closed beta the following year.
Eighty different entities spanning 17 countries tested Contour leading up to its commercial beta launch at the beginning of 2020, with the platform exiting beta just one month ago.
Contour has also been used to settle a 176,000 iron ore trade between Malaysia and China, with the Philippine-based Asian Development Bank also using the platform to execute the first cross-border blockchain LC transaction between Vietnam and Thailand.