The HSBC Banking Corporation in Bangladesh has issued its first LC letter of credit transaction. Of course, using Blockchain technology.
Sure enough, a report released this news on November 1. Noting that the transaction involved United Mymensingh Power LTD, a Singapore-based power company. The agreement made the company import 20,000 tons of fuel for its power plant.
Precisely, this document is issued by HSBC and prepared by the buyer. Mainly, to ensure that the seller receives the exact amount of funds.
Previously, it used to take between five and ten days. But, using Blockchain technology, it will be possible to execute the transaction in less than 24 hours. So if the buyer defaults, the bank must cover the balance or the full amount.
In this regard, Moinuddin Hasan Rashid, Managing Director of United Group said: “Fuel oil LCs are very time sensitive, where every second counts. We believe that Blockchain technology will help to manage time efficiently. And it will also ensure higher efficiency and better cost management«.
He also added: “We are very excited about using Blockchain technology for our imports. We understand that we are heading towards a digital age and we are ready to evolve in our effort to adapt to changes.”.
Also, Mahbubur Rahman, Executive Director of HSBC Bangladesh indicated:
“I am very pleased that HSBC has pioneered in issuing Bangladesh’s first Blockchain letter of credit transaction.”
HSBC Bangladesh’s First LC Letter of Credit
In particular, the document issued by HSBC Bangladesh was made on the platform Contour DLT. Which is a solution built on R3’s Corda Blockchain. Precisely, it connects financial institutions and corporate entities in a decentralized commercial financing network.
As indicated above, the transaction was used to settle the import of 20,000 tonnes of fuel oil from United Group’s Singapore subsidiary, United Mymensingh Power.
It should be noted that the bank is now the entity responsible for the payment, if the company United Mymensingh Power Limited does not pay all of the 20,000 tons of fuel purchased from Singapore.
In fact, the global payments service SWIFT estimated that Bangladeshi operations using LC were worth more than $ 34 billion during the first half of 2020. As such, HSBC Bangladesh believes that the potential efficiencies for businesses are very considerable.
The Contour DLT platform
So far, different tests of the Contour network have been carried out and most of them have been issued during this year.
In short, Blockchain technology can be used to execute cross-border transactions, for example those carried out with Singapore and Bangladesh. Also, in Vietnam and Thailand.
As a fun fact, Contour’s first successful LC transaction took place between two major petrochemical companies, also in the Asia region, in August 2019. When the platform was known as Voltron
In conclusion, Mahbubur Rahman stated: “This demonstrates our strong commitment and ability to support the cross-border trade of Bangladeshi companies using cutting edge technology platforms.”.
At the same time, he added: “I believe this will usher in a new era of routing for international business transactions. As companies and governments recognize transparency, security and speed in completing tasks using Blockchain technology”.
I say goodbye with this phrase from J.P. Sergent: “Success is not achieved only with special qualities. It is above all a work of perseverance, method and organization”.