The Bangladesh branch of global banking firm HSBC has conducted the country’s first blockchain-based letter of credit (LC) transaction on the Contour blockchain 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 first of its kind transaction as showcasing the bank’s commitment “to supporting cross-border trade using “cutting-edge technology platforms.”
Bangladeshi trades using LCs were worth more than $34 billion during the first half of 2020.
HSBC Bangaladesh’s chief executive, Md Mahbub ur Rahman further noted that he believes 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 LCs were worth more than $34 billion during the first half of 2020. The time taken to process the transaction was reduced from between five and ten days to less than 24 hours by utilizing blockchain technology.
Eight financial institutions own Contour.
United Group’s managing director, Moinuddin Hasan Rashi, said, “Fuel oil LCs are highly time-sensitive where every second count, 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.” It is owned by eight financial institutions, including HSBC, ING, Citi, Bangkok Bank, BNP Paribas, Standard Chartered, SEB, and CTBC. Contour’s development began in mid-2017, then-dubbed “Voltron,” before launching in closed beta the following year. Contour has also been used to settle a 176,000 iron ore trade between Malaysia and China, with the Philippine-based Asian Development Bank.