HSBC completes first blockchain letter of credit using Chinese yuan

HSBC – one of the world’s largest banking and financial services organisations – has completed the first yuan-denominated letter of credit using blockchain technology.

According to Reuters, HSBC completed the letter of credit transaction using R3’s Voltron trade finance platform.

A letter of credit is a document issued by a bank guaranteeing a buyer’s payment to a seller.

HSBC has been exploring the use cases of distributed ledger technology (DLT) for some time, having previously settled $250 billion worth of FX transactions using DLT.

The completion of the first yuan-denominated letter of credit through blockchain technology marks an important step forward for both HSBC and R3’s Corda-powered Voltron platform.

Up until this point, the transactions made using the platform have largely been individual pilot cases.

However, Ajay Sharma, HSBC’s regional head of global trade and receivables finance for Asia Pacific, informed Reuters that progress was being made toward a “full proposition, and what could be a commercially acceptable model for banks”.

“We are hoping that we will have something by the end of the year, maybe the first quarter of next year, where we will know from Voltron what it costs. At which point, a lot of banks who might be sitting on the sidelines will be able to make a decision,” says Sharma.

“Clearly we are hoping that through this technology, the unit cost of doing a transaction comes down, along with other benefits, such as speed.”

HSBC completed the transaction in just 24 hours, which is a huge improvement on the typical five to ten days it typically takes to handle these types of documents.

Interested in reading more HSBC-related stories? Discover more about the global bank settling $250 billion worth of FX transactions using DLT.