StanChart executes Bangladesh’s first-ever blockchain LC transaction

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Standard Chartered has executed the country's first-ever blockchain transaction by issuing a letter of credit for Viyellatex, in a development that can go on to help make the process of trade, both at local and global levels, much streamlined.

"The complete process was smooth and hassle-free. It's just like the transaction on a mobile financial provider -- you made a transaction through SMS or an app," KM Rezaul Hasanat, chairman and chief executive officer of Viyellatex Group, a top garment exporter, told The Daily Star yesterday.

The entire transaction was paperless and completed digitally by Contour, a global network of banks, corporates and digital solutions, all using one linked decentralised platform leveraging Corda blockchain.

A blockchain is a database that is shared across a network of computers. Once an archive has been put into the chain it is extremely difficult to change. To make sure all of the copies of the database will be the same, the network makes frequent checks, according to Reuters.

Blockchains have already been used to underpin cyber-currencies like bitcoin but a great many other possible uses in areas such as banking and offer chain are emerging.

Under the transaction, Viyellatex -- which exports $300 million worth of garment and textile items and counts Puma, S Oliver, Espirit, Marks and Spencer and Sainsbury among clients -- imported textile items from Viyellatex Spinning.

Standard Chartered acted as the issuing bank for the applicant and also the advising bank for the beneficiary of the letter of credit (LC).

A lot of the garment exporters source raw materials such as for example textiles and yarn as well as accessories locally through inland LCs, which involve tedious paperwork.

Normally, Viyellatex has to prepare an application requesting LC and a worker has to go to the bank with the printed application to hand it over.

A designated person from the supplier must come to the lender as well to get the copy of the order after the bank's scrutiny.

Later, the supplier submits an invoice after shipping the items and a person from Viyellatex must obtain it. When Viyellatex gives a nod, the lender makes payment to the supplier.

With Contour, there will be no such paperwork no dependence on bank visits. All parties -- buyers, banks, beneficiaries -- mixed up in process is capable of doing all tasks by just logging to Contour's network.

"It isn't cumbersome like normal ones. Besides, it's time and cost-efficient," Hasanat said.

Built on R3's Corda blockchain, Contour offers a distributed trade network enabling an enhanced degree of collaboration across the main components of trade with all participants leveraging the network to create and renew trade data in real-time.

"If you want to mention the top five advantage of this, they are paperless, real-time, low-cost, faster and error-free," said Naser Ezaz Bijoy, CEO of Standard Chartered Bangladesh.

Although it has been done locally, Standard Chartered would soon expand the service for cross-border exports and imports, he said.

For that, everything will be paperless aside from some regulatory processes of the Bangladesh Bank and customs formalities.

Contour improves data transparency, removes administration costs and reduces friction in global trade, all resulting in an overall increase in efficiency and decrease in costs for all parties, Standard Chartered Bangladesh said in a news release.

As one of the founding members of Contour, the multinational bank benefits from the network, which simplifies the LC process, delivering shorter settlement times, instant discrepancy resolution and simplified sanctions screening.

"We are incredibly excited to offer our clients improved speed and reduced risks of settlement made available from platforms such as for example Contour," Bijoy added.

The global trade lacks a remedy that drives out inefficiencies, increases data transparency and enables interoperability between all trade participants, said Carl Wegner, CEO of Contour.

The long-established factors of trade finance don't have sufficient integration, creating friction and unnecessary administration.

These inevitably cause significant barriers for global trade growth, adding complexity, increasing cost and delaying the procedure for both banks and corporates, he added.

"The Contour network can overcome these issues, providing a regular and reliable infrastructure for global trade to flourish, especially in countries like Bangladesh that depend on LCs for a substantial part of their trade volumes."

The recent transaction with Viyellatex serves to prove that a solution exists and designed for adoption, Wegner added.

This is simply not the only blockchain-based transaction that British lender has in store for its clients.

Standard Chartered is also rolling out a blockchain-based service for expatriate Bangladeshis in Malaysia, the fifth-highest way to obtain remittance for the united states, enabling them to send money home on a real-time basis.

"The service will be launched soon and we've partnered with a local MFS provider and a Malaysian company," Bijoy said.

As per the arrangement, remitters should be able to submit their hard-earned profit real-time by opening a mobile wallet with Malaysian fintech firm Valyou, a subsidiary of Telenor Group.

The total amount from Valyou would then be wired through Standard Chartered's businesses in Malaysia and Bangladesh. Once in Bangladesh, bKash would distribute the funds, ending the chain of cross-border transaction that harnesses the power of technology.

This means migrant staff in Malaysia can settle their cross-boundary transactions in real-time with only a few clicks on the mobile phone, within an arrangement not seen before in Bangladesh.

Corda, the blockchain platform, would facilitate the transaction.

The platform, which was made to bring transparency and trust to interactions while maintaining privacy and security, ensures data is shared only with the parties that require to know.
Source: https://www.thedailystar.net

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