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Exclusive: Deloitte Blockchain Lab on the Three Areas of Collaborations with HKMA

The Hong Kong Monetary Authority (HKMA) started exploring blockchain technology with the whitepaper on distributed ledger technology (DLT) in Nov 2016. Since then, the HKMA has been actively leveraging blockchain into trade finance including eTradeConnect, Global Trade Connectivity Network, and we.trade. What is the role of Deloitte Blockchain Lab in these initiatives?

We were delighted to interview Dr. Paul Sin, leader of the Deloitte Asia Pacific Blockchain Lab, who shared with us its development goals and the collaborations with HKMA across the Greater Bay Area and Europe.

What is Deloitte Blockchain Lab and what values does it aim to bring to enterprises?

The Deloitte Asia Pacific Blockchain Lab has been implementing blockchain solutions for enterprises across the region. Apart from the Asia Pacific Blockchain Lab, Deloitte has another two centers, one in New York and one in Dublin, covering America and Europe, the Middle East, and Africa (EMEA) respectively.

Our Lab uses mostly permissioned blockchain technology for cross-organizational and cross-border B2B data synchronization. Due to regulatory constraints in the region, we do not have a lot of public blockchain or crypto platform implementations. However, other functions in Deloitte including audit, tax advisory, financial advisory, and risk advisory have been supporting Initial Coin Offerings (ICOs), Security Token Offerings (STOs), and crypto audit in general from an assurance and cybersecurity perspective.

What goals or projects have been established at the Deloitte Asia Pacific Blockchain Lab since the collaboration with the HKMA and the twelve leading banks in Hong Kong?

In Hong Kong and Asian countries in general, small to medium enterprises (SME) have only a 20% chance of obtaining financing. Banks reject their loan applications because of identity theft, forged documents, and huge potential losses due to duplicated financing. In the past, SMEs would make a purchase order and go to multiple banks for financing, and bolt with the money. There is also no reliable way to validate buyers who can issue purchasing orders. Banks will need to get KYC information on a buyer to prove the buyer who issued the purchase order is authentic and also make sure they have the capability to pay the invoice after the goods are delivered.

Once all these aspects are validated, then the banks will feel more comfortable financing SMEs. To overcome the challenge of duplicate financing, the only way available before blockchain was to create a credit bureau with a centralized database under which all banks will be asked to submit sensitive information and trade documents to a central party. Blockchain becomes the perfect platform because it can synchronize data to all participants in the ecosystem without risking their privacy. This is the reason why the 12 banks in Hong Kong joined together with the HKMA to develop eTradeConnect, which is a blockchain-based trade finance platform.

What are the top projects that Deloitte Blockchain Lab has been working on most recently?

We have done work on a number of projects, including bancassurance in the Greater Bay Area, traceability in Hong Kong, cross-border digital identity and multi-merchant loyalty programs.

Are most of your clients mainly from the Greater Bay Area or worldwide?

For the Asia Pacific, a lot of projects are regional. For example, the HKMA signed a Memorandum of Understanding (MoU) with Singapore to jointly develop the Global Trade Connectivity Network. This project is a cross-border infrastructure based on blockchain technology to digitize trade and trade finance. These kinds of platforms all have a regional focus.

The HKMA has also signed an MoU with we.trade, which is based in Europe, to support cross-regional trade finance. Many of the participants in those ecosystems are multinational companies, and a lot of value comes from cross-organization or cross border collaborations. This is also why the Chinese government also believes blockchain is a strategic initiative because it will be an enabler for the Belt and Road Initiative and the Greater Bay Area. This sheds light on why most governments, regulators, and central banks are adopting blockchain at the moment.

Do you also have some companies working on blockchain in the Belt and Road Initiative?

Blockchain technology is mostly facilitating supply chain and trade finance, therefore it will be closely related to those initiatives.

China Construction Bank Announces Updates of Blockchain Platform After $50B Transacted

One of China’s four largest banks, China Construction Bank (CCB) has officially released the second version of its blockchain platform for trade finance, reaching 360 billion yuan ($50 billion) in cumulative transaction volume.

CCB announced the release of “BCTrade 2.0,” focusing on digitizing trade and financial services between 54 domestic and overseas CCB branches and 40 external organizations. Reported by Xinhua news, these organizations include state-owned banks and foreign banks.

Starting in 2017, CCB’s project claimed to be the first to use blockchain for domestic letters of credit, forfaiting and international factoring. In March this year, CCB announced that the blockchain was responsible for the 200 billion yuan transacted in 2018 with 40 domestic and financial participants involved.

The platform allows trading and financing activities, including accounts receivable and trade financing. Aiming to provide a regulatory system for trade finance and to enable real-time monitoring of financial activities, the second version of the blockchain was publicly announced after having reached 360 billion yuan in transaction volume. Ji Zhihong, the Vice President of CCB said that the “distributed storage, transaction traceability, and non-tamperability” characteristics of blockchain are highly compatible with trade finance.

CCB’s platform is one of many blockchain trade finance initiatives in China. A project collaborated between CITIC and Bank of China announced that it had processed 20 billion yuan ($2.8 billion) with its forfaiting blockchain.

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ConsolFreight Releases New Proof Of Concept To Advance The Role Of Logistics Providers In Trade Finance

ConsolFreight released its new Proof of Concept report “Trade Forward” at the IoT Solutions World Congress in Barcelona. The ambitious project has the support of Telefonica, who provided connectivity through Kite, their IoT connectivity platform.

It also included the collaboration of key organizations such as EOS Dublin using EOSIO blockchain technology, the Florida Blockchain Foundation, and Anova Marine, which provided insurance coverage to the transported cargo.

The Proof of Concept aims to provide liquidity, create new revenue streams, and ultimately advance the role of freight forwarders in the Supply Chain. Trade Forward is a new business model of collaboration amongst insurance companies, financial institutions, and logistics providers.

This model, where the freight forwarders are the centerpiece, brings the following benefits:

● SMEs financial inclusion

● Full oversight of trade asset movement

● Streamline data exchange between the multiple parties

● Risk mitigation and redistribution along the Supply Chain

● Optimized operational liquidity for exporters and importers

● Decreased paperwork and institutional bureaucracy

“Banks are short-sighted in determining and validating the value of the goods being financed. They have drawn a very distinctive line between Logistics and Financial institutions, where the value of the assets is entirely disconnected from the process. Thus, leaving an untapped market of unfulfilled credit demand estimated at $1.6 trillion,” says ConsolFreight’s CEO, Ernesto Vila.

This revolutionary test was carried out by a dedicated team of experts in blockchain, logistics, supply chain management, and finance. Members of the ConsolFreight ecosystem are conducting pilots along with companies like Telefonica and Anova Marine. These partnerships are allowing smaller players to get access to larger organization solutions, generating technological inclusion.

The first TradeForward shipment was handled by freight forwarder Tech Cargo in the region of North America. The following shipments will be carried out by Freight and Transit Co. LTD to enable non-traditional trade finance in the African continent. Additional pilots in LATAM will be carried out by ADEKO Enterprises S.A., Globalog S.A., and Tree Logistics.

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Shanghai Municipal Commission of Commerce Signs a Blockchain Alliance Proposal to Foster Trade And Finance

A report published on the Global Times on Nov. 7 stated that the Shanghai Municipal Commission of Commerce had signed a written proposal giving the Shanghai government departments and six financial companies an opportunity to establish an E-port area blockchain alliance with the sole aim of fostering international trade and financial services. This proposal was signed during the second China International Import Expo (CIIE).

The report noted that Shanghai is just one example of the cities in China, where blockchain has been applied for financial services. However, Qi Hong, Vice Director of China Construction Bank’s Shanghai branch, commented that the utilization of blockchain in financial services is still in its path to China.

Hong said: “We now use blockchain in sporadic financial products instead of the whole finance industry chain, and the public doesn’t have a sound understanding of the technology when it comes to financing. But I think the government’s call for blockchain construction will help push the technology’s application in a more comprehensive way.”

In a statement, Ye Jian, an official from the General Administration of Customs of Shanghai, noted that this recent development is the first application of blockchain in customs and that generally, the usage of blockchain technology is just another strategy adopted by China to leverage its business environment.”This is the first blockchain application project in customs and the first service project for the CIIE. China upholds multilateral trade and constantly improves its business environment by seeking technological innovation.”

According to the press release, Xi Jinping, the Chinese president, emphasized that blockchain technology occupies a vital space in China’s technological innovation and industrial change, being an essential breakthrough in major technological innovation.

In this regard, Chen Huifang, a professor at the College of Information Science and Electronic Engineering of Zhejiang University, said: “Blockchain technology increases the reliability of the information, thus improving the efficiency of customs clearance, reducing costs, and promoting trade facilitation.”

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BNY Mellon Joins the Marco Polo Network to Develop a More Open and Connected Trade Finance Network

The Marco Polo Network announced a new strategic partnership with the Bank of New York Mellon (BNY Mellon) to create a vast financial atmosphere that will ensure economic as well as trade growth, making BNY Mellon a member of the top network of financial institutions which leverages blockchain technology for trade finance. Some of these financial institutions include; Bank of America, National Bank of Fujairah PJSC, Anglo-Gulf Trade Bank, National Australia Bank, Standard Chartered Bank, Anglo-Gulf Trade Bank, etc.

Marco Polo Network, as a consortium of TradeIX and R3, the blockchain technology firms, financial institutions, and their corporate clients, and service providers work to make international trade more efficient.

Joon Kim, Global Head of Trade Finance at BNY Mellon, said: “Collaborating with Marco Polo members is one more measure of our commitment to provide innovative opportunities to improve the client experience throughout the transaction lifecycle.”

Kim noted that the company recognized the need to tap the potentials of blockchain technology for rendering efficient and secure trade finance services.

“We recognize the tremendous potential to harness digital, data, and advanced technology capabilities to transform essential trade finance processes to make them more efficient and secure. To achieve our goals, we seek to work with forward-looking organizations, like the Marco Polo Network, that are harnessing digital to truly transform industries,” he added.

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Accenture Forms Strategic Partnership with TradeIX, Joining the Marco Polo Network

Professional services firm Accenture has partnered with TradeIX to create new use cases for the buyers and sellers in the trade finance market. TradeIX, a trade finance blockchain startup, previously launched the Marco Polo Network along with R3.

It was announced earlier that Accenture Ventures had invested an undisclosed amount in TradeIX, while Accenture also became a strategic partner with Marco Polo in preparation for its launch in 2020. The network will help corporations integrate their technology with a blockchain system.

“We’re processing many of these transactions already, leading the way with AI, analytics, and automation to get to more streamlined processing. With DLT, Accenture has been focused on financial services infrastructure, supply chain, and digital identity – this hits the core of all three of those,” said Melanie Cutlan, the Managing Director of the Blockchain Services for Accenture Operations.

Robert Barnes, the CEO and co-founder of TradeIX, said, “As we talked to more corporates, it became apparent there was more that we could be doing. We’re looking to enhance the data between buyer and seller… including inventory information, invoice and purchase orders, advance and shipping orders, and working with contracts on the chain.”

Recently, TradeIX announced the completion of its largest open-account trade finance trial to date on the Marco Polo Network with more than 70 organizations. Some of the significant financial corporations, including Bank of America, Mastercard, and Bank of New York Mellon, became a few of the new members of the network.

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R3's Marco Polo Network Welcomes First Indian Corporate as Asia Serves as a Key Area of Growth

Launched in 2017, the Marco Polo Network aims to provide an “open enterprise platform for trade and working capital finance to banks” and corporates and a blockchain-powered solution for a better security system of the exchange of data and assets between participants.

The Marco Polo Network announced on Thursday that India’s leading provider of digital transformation, Tech Mahindra became the first corporate in India to join the R3’s open-source blockchain-based Marco Polo Network for facilitating cross-border transactions.

With this new partnership, Tech Mahindra carried out several digitized trade finance transactions, facilitated by its partnering bank DBS Bank, utilizing Marco Polo’s Receivables Discounting tool. This tool is a solution that enables effective management of working capital, enhances liquidity and reduces any risks associated with credit.

Rob Barnes, CEO of the Marco Polo Network and TradeIX, the company behind the Marco Polo Network highlighted that the decision behind bringing an Indian company onboard was due to the fact that “Asia serves as a key area of growth for the Marco Polo Network.”

“We are in extremely difficult and challenging times now, with facilitating trade and minimizing supply chain disruptions becoming even more important now than ever,” stated Barnes. “This is a great achievement with two leading institutions with more collaborations planned in the near future.”

Blockchain development in India’s Telangana

Tech Mahindra has been exploring with blockchain technology as it also has its own specialized blockchain unit. In partnership with the government of one of India’s states, Tech Mahindra launched a blockchain accelerator last month. The blockchain accelerator, T-Block comprises a four-month program presented by the Telangana government in collaboration with IBC Media, Microsoft, and Tech Mahindra. It seeks to bridge the gap endured by Indian startups as they only reap 0.2% from blockchain investments.

Upon joining the accelerator, startups will be instructed through a one-week boot camp followed by a month-long training event spearheaded by gurus in the blockchain space.

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DBS Bank Joins R3-Backed Blockchain Trade Finance Network Contour Built on Corda

Singapore’s biggest bank, DBS Bank joined R3-backed Contour Network known for digitalizing global trade processes.

Previously known as Project Voltron, Contour is a blockchain-based trade finance platform, built over R3’s Corda blockchain and was founded by R3 and major global institutions, including HSBC, ING, Standard Chartered, Citi Ventures, BNP Paribas, and Bangkok Bank, Bain & Company, and CryptoBLK. DBS Bank became the first Singaporean bank to join the network.

Project Voltron in May 2018, and the project was concluded as the founding banks have decided that they want to make the project into a real company, not just as an experiment, explained Carl Wegner, CEO of Contour.

Banking giant HSBC previously announced its success with carrying out the first yuan-denominated letter of credit (LC) using the platform in September last year. “Other banks, including Standard Chartered, BNP Paribas, China Trust, Bangkok Bank, RBS, have all done different pilots, and they are working together to understand different components of LCs and the challenges,” Wegner added.

DBS will be utilizing Contour’s digital solutions to provide fully digital end-to-end LC settlement processes, including the transfer of electronic trade and title documents to its customers. The coronavirus pandemic has led a demand for “contact-free” banking solutions which also makes digitalizing rade processes more popular and relevant. This new solution would allow an increase of efficiency in settlement time, reduction of paperwork, and the simplification of trade processes.

John Laurens, Group Head of Global Transaction Services at DBS Bank said, “We’ve been employing technology and digital solutions to innovatively unlock opportunities for our corporate customers across sectors and of all scale. This is more than simply digitizing a historically paper-based service; it’s about transforming the way industries work by providing greater transparency, security, and speed to build sustainable trade ecosystems that are able to weather the peaks and troughs of economic cycles and are resilient in times of crisis.”

In 2019, despite facing an increasingly challenging and uncertain environment, especially the second half of last year, DBS achieved a record performance and successfully launched DBS’ First Fully Virtual Wealth Management Account Opening Solution. Ajay Mathur, the Head of Consumer Banking and Wealth Management at DBS exclusively spoke with Blockchain.News to elaborate on a two-year process to taking the leap into FinTech and roll out virtual banking and wealth management services.

The integration of FinTech into banking services allows the customers at DBS to have full access to our branches with a “phygital” experience providing customers with a more tailored experience as well as a virtual digital banking and wealth management experience.

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China’s Central Bank to Develop Blockchain-Based Trade Finance Platform for the Greater Bay Area

China’s Central Bank, the People’s Bank of China (PBoC) announced its development plans for outlining a blockchain-based trade finance platform for the so-called Greater Bay Area that links Hong Kong, Guangdong, and Macao.

Governing entities in China, including the PBoC, China Banking Regulatory Commission, China Securities Regulatory Commission, and the Foreign Exchange Bureau came together to issue the official document for the proposal. The entities submitted their suggestions on financing the construction of the Guangdong-Hong Kong-Macao Greater Bay Area, focusing on global trade and finance.

The proposed blockchain-based platform would enable participating banks to securely share cross-border trading information through a reliable source. Blockchain technology was considered, as its decentralized feature that removes the need for third-party intervention when information is traded between members, enabling higher security.

The report also mentioned the support of innovative technologies including blockchain, big data, and artificial intelligence (AI) in the Greater Bay Area. The central bank’s report added that the new financial technology (FinTech) developments would also include facilitating more efficient electronic payments in Renminbi in Mainland China. Non-banking financial institutions will be supported for their expansion plans in Hong Kong and Macao.

PBoC official urges the acceleration of digitization of the Chinese economy with blockchain

China’s central bank, the People’s Bank of China (PBoC) Financial Technology Committee held its first meeting of the year this week, after months of delay due to the coronavirus pandemic.

Fan Yifei, the PBoC’s deputy governor echoed President Xi Jinping’s call for the acceleration of the country’s blockchain development adoption. The president pointed out that it is necessary to strengthen fundamental research of blockchain technology and enhance innovation, enabling China to take a leading position in the blockchain field.

The bank’s deputy governor met with the central bank’s officials as well as the heads of their affiliated financial institutions. Fan emphasized the importance of blockchain and financial technology (FinTech) industries and wanted to ensure China’s adoption plan would be laid out and implemented by 2021 to be in line with the deadline they have set out.

New policies were also discussed along with an overview of scientific studies to encourage the development plan, as Fan further stressed the urgency for accelerating the digitization of the Chinese economy.

China Construction Bank’s updates of blockchain platform after $50B transacted

One of China’s four largest banks, China Construction Bank (CCB) has officially released the second version of its blockchain platform for trade finance, reaching 360 billion yuan ($50 billion) in cumulative transaction volume.

IBM Joins Trade Finance Blockchain Platform We.Trade As New Shareholder

IBM has announced a new collaboration with blockchain-based trade finance platform, we.trade to enhance network capabilities and accelerate the global growth of the platform. We.trade was designed to connect buyers, sellers, banks, insurers, and other organizations in a network, simplifying cross-border trading.

We.trade is backed by a group of banks, including Deutsche Bank, HSBC, Rabobank, Santander, UBS, Société Générale, and a few others. As one of the largest blockchain-enabled trade networks in the world, the blockchain platform first aimed to help small and medium-sized enterprises (SMEs) in Europe to get better access to trade finance. With the new partnership with IBM, we.trade is looking to scale globally as it is expanding in Asia, Africa, and Latin America.

Built on the latest version of the IBM Blockchain Platform, IBM has been the platform’s technology partner since the beginning. We.trade was also the first enterprise blockchain consortium to go live back in early 2018.

We.trade automates trade finance processes, including providing traders with access to insurance, credit rating, and logistics services. Jason Kelly, General Manager of Blockchain Services at IBM said, “The strategic direction for we.trade and IBM is focused on driving growth and transparency across the entire trade ecosystem, collaborating to enhance the network effect of blockchain, and expanding access to trade finance and other services to the market place.”

IBM also takes a 7 percent stake in we.trade, amongst the 12 existing shareholders: CaixaBank, Deutsche Bank, Erste Group, HSBC, KBC, Nordea, Rabobank, Santander, Société Générale, UBS, and UniCredit.

During the last few months, with the emergence of the coronavirus pandemic, we.trade has observed the trend of removing paper-heavy processes in trade finance. With a digitized solution, improving access to trade finance will be essential to post-pandemic economic recovery.

“No other distributed ledger-based platform for trade has moved so rapidly to deliver value for member organizations and their customers,” said Ciaran McGowan, CEO of we.trade. “The enthusiasm for this platform underscores the need to continue to invest and expand access to a growing number of organizations.”

HSBC became the first bank to finance transaction via we.trade

The Global Trade Review reported that HSBC financed a transaction on the we.trade platform within the second round of pilots that started in June of 2019. The transaction took place between HSBC’s client Beeswift, which was a company that produces protective equipment and their sale to a company in the Netherlands banked by Rabobank.