Major banks mark
first-ever international trade using blockchain tech
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[October 24, 2016]
By Byron Kaye
SYDNEY
(Reuters) - The first cross-border transaction between banks using
multiple blockchain applications has taken place, Commonwealth Bank of
Australia and Wells Fargo & Co said on Monday, resulting in a shipment
of cotton to China from the United States.
Australian cotton trader Brighann Cotton Marketing bought the shipment
bound for the port city Qingdao from U.S. division Brighann Cotton in
Texas, the companies and their banks said in a joint statement. The
blockchain trade, for 88 bales, totaled $35,000, Commonwealth Bank told
Reuters.
Blockchain is a web-based transaction-processing and settlement system
whose efficiency banks say could slash costs. It creates a "golden
record" of any given set of data that is automatically replicated for
all parties in a secure network, eliminating any need for third-party
verification.
"Existing trade finance processes are ripe for disruption and this proof
of concept demonstrates how companies around the world could benefit
from these emerging technologies," Michael Eidel, Commonwealth Bank's
executive general manager for cashflow and transaction services, said in
the statement.
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The transaction is not the first involving the decentralized database,
used since 2009 for the digital currency bitcoin. But it is a milestone
for the traditional banking industry which at first shied away from the
technology, partly because it makes money flows harder for law
enforcement agencies to track.
Led by a consortium of over 70 of the world's biggest financial
institutions - called R3 - the banking industry has been researching
ways to harness the speed, accuracy and efficiency afforded by
blockchain.
One of its benefits is removing people from transaction processing. That
has been seen as especially appealing for cross-border trades, which are
typically held up by duplication of payment processing and time zone
differences.
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![](../images/102416pics/busine25.jpg)
The logo of Australia's Commonwealth Bank adorns an automatic teller
machine (ATM) in central Sydney, Australia, October 18, 2016.
REUTERS/David Gray
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R3 has
been researching ways to expand the use of blockchain to include "smart
contracts", or payments triggered when certain conditions are met. The cotton
transaction, for instance, involved automatically making payments when the
shipment reached certain geographic locations, the statement showed.
The
shipment is currently between Singapore and Hong Kong, and is due to arrive in
early November, Commonwealth Bank said. The bank also said that R3 - of which it
and Wells Fargo are members - did not play a part in the trade.
Brighann Cotton was not available for comment when contacted by Reuters.
Wells Fargo's head of international trade services, Chris Lewis, said in the
statement that his bank was committed to new technology. He also said
"significant regulatory, legal and other concerns remain to be addressed."
(Reporting by Byron Kaye; Editing by Christopher Cushing)
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