How Blockchain Reinvents Trust in Cross-Border Trade
Global Supply Chains, Blockchain, and Data Security Laws
Global cross-border trade has increased exponentially over the last century. Massive inefficiencies increase costs, hinder transactions, and contribute to errors. There is a growing need for digitalization to employ new technology to make operations faster, more efficient, and secure.
BSN’s Long Story Short Series #21 focuses on blockchain reinvents trust in cross-border trade.
In this webinar, we have invited excellent experts in this field to discuss the role of blockchain in cross-border trade from various perspectives. For today’s discussion, the three distinguished guests include Scott Thiel, Roy L., and Yifan He.
Yifan He is the CEO of Red Date technology.
Roy is an emerging technology innovation lead (in the field of blockchain) at EY.
Scott is the partner at DLA Piper and the founder of ‘Tokyo.’ He is responsible for technology practices for the region with a wide range of disruptive technologies, including blockchain.
The global pandemic has sparked fears that have resulted in increasingly stringent border controls and, ultimately, escalating trade costs. All parties involved, including manufacturers, trading companies, transportation companies, and banks, are looking to mitigate the situation. Why can blockchain be a “booster” for global trade if the answer is yes?
Roy: From a tech perspective, blockchain will be a breakthrough to bring efficiency overall. However, it is tough to deliver because technology is just one layer of the challenge. For instance, financial participants, banks, loan companies, tax authorities, and even regulators are involved in multinational Logistics. The cost of communication, compliance and trust is very high.
Yifan: Compared to trading relationships and trading requirements, technology is of most minor concern. Technology cannot solve problems due to the global pandemic in the policy layer. However, blockchain technology can increase communication efficiency between the parties involved in international trade transactions and thus reduce costs.
Why would a large global law firm develop an asset tokenization platform? What type of assets are you looking to tokenize? What’s the business?
The rise of cryptocurrencies and NFTs is driving tokenization in law firms. Various mineral and natural resource projects- stakeholders were interested in tokenizing assets that had yet to be mined. Creating new financial instruments, such as green bonds around real estate, attracts more investors.
Can you share some examples of blockchain applications in cross-border trade based on your experience? Also, consider their respective limitations.
Roy: In China, the General Administration of China Customs (GACC) utilizes blockchain technology to improve the efficiency of parallel import cars. EY works with Shanghai customs to improve trust and security issues for the bonded warehouse through blockchain technology. The technology mainly helps regulators and trade companies ensure that documentation is correct.
Yifan: TradeTrust is an open-source project initially developed by the government of Singapore and administered by MDA. They create a standard when people transfer documents, credit, and data sets. The project can encrypt data and create an NFT on the public chain (currently Ethereum). TradeTrust is a verification center where documents ownership can be verified from the TradeTrust website. However, political or country-specific operability requirements are hurdles in the path of technological adoption.
Scott: Blockchain technology is all about collaborating global solutions that are capable of creating globally efficient solutions. So far, there is a greater level of collaboration, as can be seen in China. The base layer1 protocols, which allow digital assets to be moved across platforms, are being developed.
With a myriad of stakeholders from various jurisdictions involved in cross-border trade, it is paramount that the exchange of all digital assets and trade information be managed securely. In the meantime, businesses must adhere to local and international data laws in cross-border transactions. What role can blockchain play in this?
Yifan: Blockchain technology is of utmost importance so that all parties can talk to each other. The Singapore government supports Ethereum and convinces Chinese governments to build NFT on the public chain (Ethereum). But public chains are against Chinese regulations. So the Trade Trust project built a bridge between public and permissioned chains so that transactions can be smoothly verified. Also, China published data laws, and blockchain technology can be a gateway for government to verify data-related information.
Roy: Data is the most crucial asset for the digital economy. China has started joining the global standard to publish its own data security and privacy laws. Data solvency will also be a critical issue, and blockchain technology could help countries comply with local and global laws.
Scott: The economic tensions between nations are related to how data laws are being used as tools to achieve broader objectives (access to information, access to intellectual capital, etc.) Blockchain may not be the solution here because the role of technology is to keep the data within the jurisdiction itself, such as China. However, this solution may not work for other countries. Hence, ‘Tokyo’ leverages public chain trust, and the platform was built after figuring out what information goes where, and it was designed by keeping global privacy in mind.
What do you see as the future of blockchain regulation in cross-border trade?
Yifan: The BSN supports all types of blockchain technologies (permissioned, permissionless, and open-permissioned) with various use-cases to adapt to different regional regulations. We believe that technology needs to move towards regulation and not vice-versa.