A group of commodity leaders and traders are reportedly supporting blockchain platforms that may revolutionize the trade finance industry. The group includes energy leaders like Gunvor, Mercuria, Koch Supply & Trading, and Royal Dutch Shell. The financial institutions that are involved in the group include ING, ABN Am, Citigroup, and Societe Generale.
The blockchain technology has already been deployed by a number of companies across the world. The group in particular will deploy the Ethereum blockchain platform for faster, securer, and cheaper ways of completing trades and making transactions. The blockchain platform thus adopted will be used for storing contacts, invoices, miscellaneous paperwork, letter of credit and a lot more.
The Chief Executive of Komgo, “Souleima Baddi” supported the platform saying that the blockchain adoption will improve efficiency and security. Komgo would play a leading role in the initiative take up the group to bring the blockchain technology into practice. Komgo will play a crucial role in digitizing the lenders client identification documents and the electronic letter of credit. The focus of the company would primarily be on commodity trade financing.
Komgo along with VAKT will come to action in November 2018. VAKT will keep an eye on the raw material in particular. Its role would be to carry out the formalities needed to complete to put the platform in action. Komgo and VAKT will be two blockchains that will work like a team enabling the users or customers to complete the transactions and make a digital entry of the same with ease.
The blockchain is an electronic ledger that uses cryptocurrency for recording data and storing information. Once the data is entered into the blockchain technology it can neither be altered nor be removed. Commodity trading and finance are two such sectors that require certain paperwork. These sectors have been using the paper technology since time immemorial. A shift to blockchain technology would enhance their working capabilities and will improve the speed by which transactions are completed.
Financial institutions and commodity traders have previously tested blockchain technology for efficiency. During the trails, the technology completed the transactions with less than a fifth of the average time consumed by the traditional mode of transaction. The Blockchain is helping many companies in many innovative ways. For instance, Cargill is running a scheme for turkeys. AP Moller-Maersk has also deplored the technology in marine insurance contracts and likewise, financial institutions Deutsche Bank are using the technology for cross-border trade finance.
The two blockchain programs are a result of previous successful blockchain trials. In 2017, a blockchain-based technology was deployed in an oil-cargo deal, which involved Geneva-based energy trader Mercuria, and financial institutions ABN Amro, ING, and SocGen. VAKT is expected to be launched in 2019 focusing the North Sea oil market. The blockchain platforms will help traders and financial institutions in maximizing their savings and utilizing time.
Ms. Baddi, a former deputy head of commodity finance at SocGen also supported the initiative saying that the platforms will work together to answer many problems within the trade and financial institutions.