CryptoBLK lures bank giants to bring blockchain to trade finance

January 21, 2019 16:19
Duncan Wong, CryptoBLK’s co-founder and CEO, is among the tech enthusiasts who are seen as having driven HKMA's early dalliances with blockchain technology. Photo: HKEJ

In October 2015, The Economist published a much-discussed report on blockchain, featuring the topic on the magazine's cover along with the tag line “The Trust Machine: How the technology behind Bitcoin could change the world.”

Since then, the technology has gained a lot of traction and won many fans, but at the same time it has also had its fair share of skeptics.

Questioning the hype surrounding blockchain, critics have raised queries about the actual use case of the distributed database or ledgers shared by participants in an ecosystem over public or private computing networks.

In what can be seen as an answer to such doubters, a Hong Kong-based startup, CryptoBLK, is trying to spread the message that blockchain can be put to use for common business applications, especially in a global trade and financial center such as Hong Kong.

Duncan Wong, co-founder and CEO of the blockchain startup, claims that he has won support from the traditionally conservative financial institutions to build a new initiative focused on leveraging blockchain in trade finance.

In trade finance business, banks provide financial services for trading parties, such as issuing letter of credit (LC), a payment mechanism used in international trade to provide an economic guarantee to an exporter of goods.

However, the existing letters of credit mechanism is largely paper-based, with time-consuming document exchanges and communication work involved in the process, and banks need to spend a huge amount of effort to verify the information from the trading parties.

Wong believes the immutability feature of the blockchain technology can solve the trust issue in trade finance between banks, trading parties, and related stakeholders. Corporate customers will be able to connect with their banks and trading partners via a single, simplified channel, for both issuances of letters of credit and exchange of documents across an open network.

The data will be encrypted in the distributed database and cannot be changed once recorded. The blockchain-powered platform will also deliver real-time track and traceability to trade finance transactions.

Voltron platform aims to lower costs as small and midsized companies, which lack transaction and financing history, will be able to submit and verify purchase orders and invoices to request trade financing from the banks of their choice, according to Wong.

The blockchain solution can mitigate the risk of double financing and fraudulent trade information across the industry, as the banks will have access to trusted trade information, he added.

Voltron platform also provides the first single, shared blockchain application for trade finance among banks, which may be operating vastly different and legacy computing systems.

Founded in 2017, CryptoBLK is utilizing the Voltron platform as it entered into a partnership with R3, an enterprise blockchain software firm that is working with over 200 members and partners across multiple industries around the globe.

Founding members of Voltron include banking and financial service giants such as BNP Paribas, CTBC Holding, HSBC, ING, NatWest, SEB, Standard Chartered and Bangkok Bank.

In May 2018, the platform demonstrated its viability with a successful live transaction with HSBC, Dutch bank ING, and the food and agriculture conglomerate Cargill. The transaction was completed via the platform for a shipment of soya from Argentina to Malaysia. The process was completed in 24 hours, as opposed to the usual settling time which can take five to 10 days.

With the first proof of concept successfully carried out, the initiative has moved into its pilot stage, with HSBC, ING, BNP Paribas, and other companies completing more live transactions.

Wong says the Voltron platform aims to roll out the “minimum viable product (MVP)” version between February and March this year, and that it will head into the production phase.

As the technology service provider for Voltron, CryptoBLK will continue to develop new features and maintain the operation of the platform.

Asked how the startup aims to win the support of more multinational institutions and industry giants, Wong says the answer lies in "how we can provide a blockchain solution that suits their business pain-points.”

"As long as [customers] identify those pain points, they will actively participate [in the initiative]... otherwise it is still difficult to convince them (to try blockchain solution).”

As one of the pace-setters for Hong Kong's blockchain sector, Wong had previously worked for the Hong Kong Applied Science and Technology Research Institute (ASTRI), where he helped pen HKMA’s whitepaper on Distributed Ledger Technology.

The document, which was published in 2016, outlined the industry guidelines for blockchain applications in areas such as trade finance. Wong also helped HKMA complete multiple proof of concepts (PoCs) with banks to explore the application of blockchain in trade business.

Asked about the prospect of the technology, Wong said that most companies for now “still don’t know much about blockchain; many of them have a more conservative or negative feeling about it... they even mix up blockchain with cryptocurrency technology.”

Though the technology is still in the early stage of development, it is encouraging to note that there have been multiple successful applications, such as payments, trade financing, and automobile insurance, he said.

“It reminds me of the development process of internet technology since the 1990s,” said Wong. "First, we saw the emergence of browser tools such as Netscape, then we had Microsoft’s Internet Explorer, Google’s Chrome, and then a number of fairly popular applications, such as video streaming, which became the ‘killer apps’ that broke through and went viral.”

Wong believes blockchain application is poised for explosive growth, and that the technology will be popular worldwide in the next 10 to 20 years. 

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EJ Insight writer