Commonwealth Bank, Wells Fargo and Brighann Cotton have completed what they claim is the first global trade between two independent banks using blockchain and smart contract technologies.
The transaction, which involved a shipment of cotton from Texas in the US to Qingdao, China used the Skuchain Brackets distributed ledger for all parties. Silicon Valley-based Skuchain develops blockchain-based products for B2B trade and supply chain finance.
The trade involved an open account transaction, mirroring a ‘letter of credit’, executed through a collaborative workflow on a private distributed ledger between the seller (Brighton Cotton US), the buyer (Brighton Cotton Marketing Australia), and their respective banks (CBA and Wells Fargo).
The trade introduced a physical supply chain trigger to the terms of the transaction to confirm the geographic location of goods in transit before a notification is sent to allow for release of payment, CBA said on Monday.
The tracking feature adds a new dimension, providing all parties with greater certainty compared with traditional open account and trade instruments like ‘letters of credit’ which focus on documents and data.
Brighann Marketing, GM, Cameron Austin said in a statement that the combination of these emerging technologies could eliminate many inefficiencies currently experienced in international trade.
“The benefits of lower costs and improvements to security through reduction of errors, risk and time, enable a company to achieve greater efficiency and have more predictive working capital,” he said.
Michael Eidel, executive GM of CommBank’s Cash-Flow and Transaction Services, said existing trade finance processes are ripe for disruption and this proof of concept demonstrates how companies could benefit from these emerging technologies.
“We strive to stay at the forefront of disruptive technologies to understand how they can be used to enable greater efficiencies and solve the real world challenges our customers face.
“The interplay between blockchain, smart contracts and The Internet of Things is a significant development towards revolutionising trade transactions that could deliver considerable benefits throughout the global supply chain,” he said.