Trade Finance & Blockchains

An approach to closing the Trade Finance gap.

As chair of the Capital Markets Special Interest Group (CMSIG) in Hyperledger, an open source consortium for Distributed Ledger Technologies (DLT), I feel that taking a look at mitigating the Trade Finance gap would also help us with our work with established capital markets products and DLTs as it goes back to the basics of DLTs and securitization and capital markets. Where possible, data obtained through the use of surveys and papers by industry bodies like the ICC and ADB are cited and used. The data from these observations are fused with current developments to make informed guesses about where the Trade Finance sector is headed, including securitization. This is a rewrite of an article that was published on Trade Finance global.

Traditionally, Trade Finance is a function that mitigates the risk between supply and demand, the duo that drives all economic interactions. The Trade Finance function has been fulfilled by banks and financial institutions since they are operationally structured to work across federal and national borders as well as having expertise to price specific deals in line with associated risks. They also have the balance sheet to support this activity that fits well within their role. The current level of Trade Finance deals is in the range of $15 trillion.

History of Trade Finance

Trade Finance is the oldest known type of financing. Writing itself developed to account for money lent to traders as…