Standard Chartered is teaming up with Siemens for a pilot scheme that puts bank guarantees for trade finance on a blockchain.
According to the report, the trial was launched in March and is expected to be completed later this year. If the pilot project is successful, it would benefit Siemens in bringing in new facilities for large clients, digitising guarantee issuance and amendments and claims.
The blockchain would be built on startup R3’s open-source Corda platform. There would be an application layer provided by TradeIX.
According to a report by IBS Intelligence, the initiative supported by digital ledger firm TradeIX is aimed to move the process from a traditional paper-intensive one to a fully digitise bank guarantee issuance from end to end using automated smart contracts.
Just like letters of credit, bank guarantees are issued by lending institutions as a pledge to the rule that the liabilities of a debtor will be met.
The “industry-defining solution will transform the way guarantees are issued and processed,” said Motasim Iqbal, head of transaction banking UAE at Standard Chartered.
However, this is not the first attempt by the multinational banking firm to use blockchain and back in 2015, the bank was trying to introduce blockchain technology in trade finance.
Since then, the bank has embarked on various trials and collaborations. The most recent attempt was acting as banking partner for a blockchain-based remittance service launched by Alibaba Group’s Ant Financial.
Michael Bueker, Siemens’ Chief Financial Officer (CFO), predicting that integrating the blockchain trade finance solution into the firm’s daily operations would “streamline our processes and make our trade finance operations smoother, faster and more efficient.”