Barclays and the Israeli startup Wave have carried out what they say is the world’s first trade transaction using blockchain technology, shortening to under four hours a process that normally takes between seven and 10 days.
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The transaction guaranteed the export of almost $100,000 worth of cheese and butter from Irish agricultural food cooperative Ornua — formerly the Irish Dairy Board — to the Seychelles Trading Company.
The deal was executed using a blockchain platform developed by Wave, one of 11 startups to go through the Barclays Accelerator program in New York last summer. Since then the Kfar Sava-based company has been working with Barclays’ trade and blockchain team in Britain and South Africa.
Blockchain technology creates an electronic record keeping and transaction processing system that allows all parties to track documentation through a secure network, without third-party verification. This contrasts with the present cumbersome and lengthy paper-heavy process.
Proponents of the technology, which originated with the digital currency bitcoin, say that because it does not require manual processing or authentication through intermediaries, it makes transactions faster, more reliable and easier to audit.
Wide adoption of blockchain, though, is still five to 10 years away, experts say.
“We’ve proved the reality of this technology and the client, Ornua, has asked us when they can do the next transaction in this way, which proves how user-friendly the entire process was,” said Barclays’ global head of trade and working capital, Baihas Baghdadi.
The transaction was executed by means of a letter of credit, a widely used way to cut risk between importers and exporters.
But such transactions typically involve a complicated paper trail that requires international courier services, is vulnerable to document fraud and can take as long as a month to complete.
In this transaction, both parties were able to transfer the shipping, insurance and other original documents that had been cryptographically sealed via the blockchain.
Barclays was not the first to experiment with using the technology for trade finance, which has been marked as among the most ready areas for blockchain-based innovation, but the bank says it was the first such trade transaction to be executed “in the wild,” rather than in a lab.
Last month an HSBC and Bank of America Merrill Lynch venture and fintech firm R3 said separately that they had found ways to simplify trade finance processes with blockchain.