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World Economic Forum report: DLT can generate $1trn in new trade

The WEF's research paper says that if distributed ledger technologies, such as blockchain, are not adopted, the trade finance sector will pay a heavy price

A World Economic Forum (WEF) report released on 13th September claims that distributed ledger technology (DLT), including blockchain, has the potential to generate $1 trillion in new trade over the next decade.

“Distributed ledger and other technological innovations promise groundbreaking advances in trade and supply chain finance by reducing costs and ease of use,” the report reads.

What is distributed ledger technology (DLT)?

DLT removing obstacles

“Nearly 30% or $1.1 trillion of new trade volume will result due to DLT removing barriers. About 40% or $0.9 trillion of traditional will move to DLT for better service levels and lower fees,” it adds.

The document titled “Trade Tech – A New Age for Trade and Supply Chain Finance” was jointly put together by the WEF and Bain & Company.

What is blockchain technology?

Making financing easier for SMEs

Blockchain technology can account for a greater part of the $1.5 trillion supply-demand gap in current global trade finance through making financing easier for small and medium businesses in emerging markets. The difference is estimated to increase to $2.5 trillion by 2025 due to the credits and loans limitations for SMEs.

However, the research reiterates that a trillion US dollars could reduce the missing funding if DLT is adopted more extensively.

“They would help mitigate credit risk, lower fees and remove barriers to trade,” the report explains. “If implemented, the main beneficiaries are set to be SMEs and emerging markets, which suffer most from a lack of access to credit and have ample room to grow trade. ”

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