APPLICATION

Shareholders include HSBC, China Construction Bank, and eight other banks. R3 blockchain trade finance project Contour officially launches.

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Shareholders include HSBC, China Construction Bank, and eight other banks. R3 blockchain trade finance project Contour officially launches.

According to the report from the British media Global Trade Review (GTR), the trade finance platform Contour, developed based on the blockchain technology framework Corda by the distributed ledger development company R3, has transitioned from beta to production. In addition to completing the delivery of credit guarantees with the Asian Development Bank (ADB) in September, the platform is also set to add a bank guarantee module by the end of October or November.

The predecessor of Contour: Voltron

Contour originated from Voltron, a trade finance application prototype developed by R3 in mid-2017. It underwent testing with over eighty banks and corporates and was trialed across 17 countries and various commodities before becoming an independent commercial entity, Contour, in early 2020.

Contour has eight prominent bank shareholders: Bangkok Bank, BNP Paribas, CTBC, HSBC, ING, Standard Chartered, SEB, and Citi.

The Threshold of Technological Management of Letters of Credit: Rules or Regulations

Through multiple rounds of testing and review, banks and corporates have been able to manage Letters of Credit (L/C) using Contour from a technological standpoint. However, members of Contour faced the challenge that many legal jurisdictions only recognize paper-based signed L/Cs, hindering digital progress. Therefore, with the official launch, members collectively established rules and agreed upon principles in an attempt to address this issue.

Vinay Mendonca, Global Head of Products at HSBC, stated, "Rules are important. Once we set the rules, everyone can participate and understand their roles and responsibilities." This way, there is no longer a need to string together four to five separate contracts between the buyer, seller, and their respective banks, and can comply with the International Chamber of Commerce's Uniform Customs and Practice for Documentary Credits.

Li Yu-Xian, President of the National Cheng Kung University Blockchain Research Society and Director of the Blockchain University Alliance of the Republic of China, who has had extensive exchanges with R3, commented, "When conducting digital technology innovations such as blockchain in trade finance, companies face many challenges. There is a need for institutional changes within the company, IT system integration, risks, cost-sharing among companies, and even regulatory agencies often play a crucial role, with each link being a key factor that affects success or failure."

Beyond the Application of Letters of Credit

The main benefit of Contour is to reduce the time taken to process letters of credit by 90%, from the original ten days to less than 24 hours. Additionally, Carl Wegner, CEO of Contour, mentioned that they plan to incorporate more features in the future, such as adding a bank guarantee module by the end of October or November and integrating electronic bills of lading with partners into the network.

Mendonca of HSBC stated that they plan to transition all regular documentary credit customers to the network, especially large markets for documentary credits such as Vietnam, India, and Bangladesh. HSBC also issued an official post regarding this progress, although netizens have mocked HSBC for its recent money laundering scandal, pointing out that this trade finance platform is not the first of its kind and certainly not decentralized.